By Steve Maltzman. Whenever sales begin to slide, it's time to consider cost cuts. But even if sales stay within your current business plan, it's important to control operating expenses, starting with those I categorize as general and administrative expenses:
Analyze maintenance contracts. It might be cheaper to repair equipment on a time and material basis. I find that service contracts on copiers usually make good sense, but not those on computer hardware.
Examine equipment leases closely. The effective interest rate charged may be higher than what you would pay to finance a purchase.
Control cellular costs. This is one area where I find remodelers constantly over budget. Analyze calling patterns and look into switching to a calling plan that matches your usage. Swap cell phones for two-way radios.
Review the office phone bill. You may find charges for lines or services that you don't use or didn't realize you had.
Review your subscriptions. Are you paying for any periodicals that no one reads?
Challenge your insurance. Does it include any unneeded or redundant coverage? Are employees assigned to the proper risk category for computation of workers' comp premiums?
Control overtime. You might be better off putting an employee who regularly works more than 40 hours a week on a salary instead of paying overtime. (Check state labor laws to find out if salaried employees are exempt from overtime pay.)
Check your benefits package. You may be offering some benefits, such as disability and life insurance, that employees really don't care about.
Review owner's compensation for reasonableness. S-Corp owners sometimes overpay payroll taxes because they pay themselves more W-2 salary than necessary. According to the IRS, however, S-Corp owners must pay a "reasonable" salary, so check with your tax advisor before reducing your W-2 wages.
--Steve Maltzman, CPA, is president of Builder Accounting Services in Redlands, Calif.
