11 Small Business Money Saving Ideas

Last Updated December 16, 2024

Small business owners should always be thinking about how they can save money. And while saving money in business isn’t always easy, it is certainly possible by doing some critical thinking.

Figuring out how to do this is one of the biggest challenges for small business owners, who often have to deal with tight finances that force them to cut costs where possible. In fact, 82% of small businesses fail because of cash flow problems, with 29% of all business failures specifically stating that they simply ran out of cash.

Understanding how small businesses can save money first requires some basic understanding of how to manage your cash flow and other basic business accounting practices. By improving your knowledge of business finances and then implementing the following cost saving tips for companies, you can put yourself in a stronger financial position.

With that said, here are 11 money-saving tips to get you started.

1. Negotiate More Advantageous Payment Terms With Buyers

One of the most financially devastating things that can happen for a small business is when a client does not pay. This can become extremely problematic for your cash flow, as your business may be left with insufficient funds to cover its expenses. If you are required to take out a loan to make up the deficit, you will lose money over time because of interest costs.

As part of building better relationships with your clients, you should consider negotiating more advantageous payment agreements. This could include offering an early payment discount, as well as charging a late fee for late payments. You might also wish to consider changing your payment terms (such as shortening your payment terms from net 30 to net 15) so you can get faster payments and avoid potential cash flow issues that might cause you to take out a costly loan.

2. Ask Suppliers for Early Payment Discounts

Just like how you can offer early payment discounts to your own buyers, you can potentially save money by asking your suppliers if they are willing to offer an early payment discount. Many suppliers will be willing to provide a 1-2% discount if you make your payment within 10 days of receiving your invoice. That may seem small, but these discounts can really add up over the course of the year—particularly with suppliers with whom you make large orders.

3. Regularly Reevaluate Your Suppliers

One of the most important business money-saving tips to remember is to regularly reevaluate your suppliers and service providers. Obviously, you should consider whether their products or services are meeting your expectations—but you should also consider whether their cost still fits your business’s budget.

For example, if you’re trying to figure out how to save money on shipping in small business, you could request quotes from other vendors to see if they can offer a better price than your current shipping partner. You may find a cheaper vendor who meets your needs just as well, or you could use the lower quote to negotiate a cheaper rate with your current supplier.

4. Reevaluate Pricing for Your Products

Pricing your products is an important strategic consideration for your business. Price them too low, and you won’t be able to make enough of a profit on a per-unit basis. You might even lose money on your sales! On the other hand, pricing your products too high could drive away customers and make them less likely to buy from you.

When pricing your products, you should evaluate both the cost of production and what your target audience would be willing to pay. Pricing your products at a rate that is competitive while still generating a good return on investment will help you find the right balance and drive sales.

5. Understand How to Reduce Your Tax Burden

Figuring out how to save money on taxes for small business owners can lead to major savings each year. The good news is you don’t have to resort to anything shady—there are several legitimate strategies for how small businesses can save money on taxes.

Business owners can reduce how much they owe on taxes by recording all business losses (which reduce taxable income), tracking all business-related expenses (including travel), and utilizing startup deductions for new businesses. Structuring a small business as an LLC can also allow business income to be taxed at the same rate as personal income tax, reducing the tax burden associated with your small business.

6. Forecast Future Cash Flow to Find Ways to Improve Cash Flow

Forecasting your future cash flow helps you predict what your cash flow would look like based on projected income and expenses for a future period. This can be especially helpful when evaluating business money saving ideas or other strategic decisions and whether they are financially viable.

For example, you could use cash flow forecasting to determine if you could afford to hire a new employee or purchase a particular piece of equipment. By accounting for historical data and projected trends, you can help your business save money by avoiding costly mistakes. With good information, you can make better financial decisions.

7. Consider Leasing Equipment

One sometimes overlooked cost-saving idea for businesses is to lease equipment rather than buy it. Leasing helps you avoid spending the larger down payment or full purchase price if you buy equipment. In addition, leasing programs often include maintenance as part of their plan, helping you save on repair costs.

Lease payments can also help you save on taxes, as they are usually fully deductible, which helps you reduce your taxable income. This can also make taxes easier as you won’t have to try to calculate depreciation expenses.

8. Invest in Automation Tools

Automation tools can be a major money saver—especially when it comes to accounting software. For example, tools that automatically track receipts and business expenses help you get all the deductions that you qualify for when you file taxes.

Accounts receivable management software that helps you quickly create, send, and track invoices can help you save money through convenient, error-free e-invoicing. Such solutions can also automate payment reminders and even provide a streamlined billing portal, helping ensure you don’t risk losing funds through non-payment.

By saving time and preventing errors, automation tools give your team more time to focus on higher-level activities so you can maximize your productivity and profitability.

9. Outsource Non-Core Activities

Outsourcing is one of the most common cost-cutting ideas for companies, and for good reason. For small businesses, it often isn’t financially feasible to hire a full-time employee to manage tasks like IT, human resources, or accounting. At the same time, you likely don’t have the expertise (or time) necessary to handle these essential tasks yourself.

Outsourcing to a third-party service provider can typically help you save money in comparison to hiring a full-time employee by offering this essential support at a flat monthly rate. This helps keep your business running smoothly by ensuring you have access to essential functions and technology, further increasing your own productivity (and potential for profits).

10. Consider Remote or Hybrid Work Options

Depending on your business model, allowing for a remote or hybrid work setup can also help your company save money by eliminating office overhead. With a fully remote model, you can forgo an office altogether, while a hybrid arrangement could allow you to use a smaller office space than you otherwise would.

While your business would need to invest in cloud communication and project management tools to help team members collaborate effectively, these costs are generally much less than what you would pay for rent and utilities at a brick-and-mortar office location.

11. Choose the Right Funding Solution

Finally, when you need additional funding (whether to start or expand your business), it’s important to consider the costs associated with different funding solutions. Small business loans and various business lines of credit will typically offer lower interest rates than a business credit card. However, the interest rate you qualify for will vary based on your credit score, collateral, revenue, and other factors. If you have a lower credit score or don’t have collateral, you will typically have a much higher interest rate, which can eat away at your earnings over time.

When available, equipment financing may offer better terms and interest for that specific purchase.

Alternatively, your business could save money by using invoice factoring instead of a loan when you need to improve your cash flow. By selling open invoices to a factoring company for a cash advance, you can get the money you are owed from your invoices right away to fund your activities. Quite often, the factoring fee will be much less than what you would owe in interest if you took out a loan.

In-Summary: Money-Saving Tips for Small Business Owners

Figuring out how to save money in business may be challenging, but it’s far from impossible. As you implement these and other money-saving ideas for small businesses, you will be able to improve your bottom line, maintain profitability, and ensure you have sufficient cash flow to manage your expenses and growth plans.

Learning how to save money as a small business owner is ultimately one of the most important things you can do to ensure the long-term success of your business—so be sure to use these strategies to find new opportunities for improvement.