Money saving tips for small businesses
By Dana Dratch • Bankrate.com

When you work for yourself, every dollar comes out of your own pocket. You lose the expense accounts, company credit cards and plentiful office supplies.

But then, you don't have to deal with micro-managers, outdated purchasing agreements and corporate red tape. And you get to pocket every buck you save.

So now that you're in charge, here are some tips to help you hang on to a little more of your green.

Economical equipment
Make the slowing economy work for you.

"It's a smart time to take advantage of the troubles in the electronics sector," says Chris Farrell, co-host of the nationally syndicated public radio show Sound Money. Many electronics companies have lots of merchandise to unload and deals are better than ever. One particular Dell computer has fallen $200 in the past two months, according to Farrell.

The same strategy works for office furniture. Good, used desks and chairs are flooding the market at prices sometimes half (or lower) than that of new stock.

"This is another place where a softening economy and business cutbacks can work in your favor," says Terri Lonier, author of Working Solo eNews. For the best deals, scan the newspaper, call the local chamber of commerce or visit a furniture liquidator or used furniture store.

And consider all real estate options. When Mary Hunt, author of Mary Hunt's Debt-Proof Living, was looking for a space to house her new company almost 10 years ago, she selected industrial space instead of a more conventional commercial site.

With the cost of California real estate now sky-high, she figures the choice saves about $7,000 a month. Hunt Publishing, which produces cheapskatemonthly.com, now grosses $1 million a year, but Hunt says early thrift and low overhead "probably kept us from going broke."

Shopping for services
Don't limit cost cutting to tangible office items. Examine your service needs and then shop around.

A good starting point: your check register. "Take the checkbook out and make a detailed list of the last six to nine months," says Gene Fairbrother, lead small business consultant with the National Association for the Self-Employed. Fairbrother helped one client cut her $150-a-month cell phone bill almost in half by more carefully tailoring the calling plan to her business needs. The same scrutiny can help with nearly every service.

One cost-cutting area too often forgotten is insurance. If you haven't looked at insurance prices in two years, it's time to shop around, says Fairbrother.

Re-evaluate what coverage you really need, and see who has the best price. If you have several large policies, Fairbrother recommends asking your agent about an umbrella policy, which is sometimes cheaper. Here you drop the dollar amount on some policies, while carrying a higher coverage on the umbrella policy.

You also should explore raising your deductible. Increasing your $250 or $500 deductible to $1,000 can save at least several hundred dollars a year, says Fairbrother. Then take $1,000 and put it in an interest-bearing account. If you have a claim, the money's there, but in the meantime it's working for you, not the insurance company.

Maximizing your money
Get your money working harder. If you're using a bank account for your business, some banks will try to lock you into a business account, one that might be more expensive than a personal account and may not earn interest.

Sole proprietors, however, should be able to use an individual account, says Fairbrother. Sit down with the bank manager and talk about your business needs. Don't be afraid to do the same with several other banks.

If you opt for a business account, ask about cash management or sweep accounts, says Lonier. Each night, money is swept into an investment account.

"It's essentially a smart way to get interest on your business account," she says.

To get an idea of what's available, head to Bankrate.com's Small Business account search for a comparison of corporate checking accounts.

And don't overlook your credit options.

If you use a personal credit card for your firm's expenses, make sure you have the best deal. Shop around, demand better of your current account holder or switch.

The same is true if you've separated your personal and company charge accounts. Bankrate.com lets you search for a credit card that meets your business needs, ranging from no fees to carrying a balance to a long grace period.

Cost-effective employment strategies
To keep more of your money in the family and simultaneously save some company dollars, hire your child. You get relatively inexpensive office help and your youngster earns some cash.

Your son or daughter can stash earned income (up to $2,000 this year; $3,000 next year) into a Roth individual retirement account, which can be tapped penalty-free after five years to pay college expenses. And you get to deduct the salary as a business expense.

"For those that have children, this allows them to save money for college in a really tax-efficient manner," says Rob Weagley, associate professor of consumer and family economics at the University of Missouri at Columbia.

No kids? Consider hiring someone else's. For less money than experienced adults command -- and sometimes for no money at all -- high school, college or vocational students will help you out for a few hours a week. In return, the budding businessmen and women get contacts, work experience and references to help launch their careers.

Trimming travel costs
When you can't eliminate business travel, here are some ways to trim on-the-road expenses.

Consider flying second-tier airlines. If you're flexible about your departure time and carrier, you can save some serious money. Chances are you'll get a better price and fewer restrictions. The trade-offs: less direct and fewer flights, giving you less control over the time you fly.

Once you're on the ground, get your rental car through a discount broker. Most, such as Hotwire.com or Priceline.com, let you specify the size car you want, where you need it and for how many days.

However, you don't find out which company you're renting from until you pay. Considering the product, it's a perfect match, says Hasbrouck.

"As for the function," he notes, "all rental cars are the same."

Alternative lodging
Want to stay in Manhattan for $25 to $30 a night? Try a hostel. Sure, it's not the Ritz. But you get a clean, safe place to stay for a fraction of a hotel's price, says Edward Hasbrouck, author of The Practical Nomad Guide to the Online Travel Marketplace. But be prepared to share a dorm-style bedroom, with the bathroom down the hall.

If you're not up for communal life, try a budget motel or a residence inn, many of which are specifically designed for business travelers. And don't be afraid to dicker on the room rate, says Hasbrouck. Unless there's a convention in town or it's vacation crunch time, chances are the hotel has some empty rooms. Call the hotel on the day you want to check in or just show up with bags in hand, prepared to leave if you don't get a good deal.

"There are usually some code phrases," says Hasbrouck, such as "Is there some lower rate I might qualify for?" or "Is there someone I should speak with about a lower rate?" Or just simply say, "I'm looking for a place tonight. What's your cheapest room?"

If you do end up in a hotel, don't eat there. Hotel food is among the most expensive. Instead, hit a local restaurant, diner or even a fast-food place. Want room service? Call Domino's. Save the hotel dinners for entertaining clients.

Dana Dratch is a freelance writer based in Georgia.

-- Posted: Aug. 10, 2001