Wells Fargo Small Business Roundup

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DOL Gears Up for Small Business

An Alternative to AMT?

Proactive Tax Planning

Streamlining Cash Flow

Building Relationships with Blogs

Controlling the Variables

Keeping Up with the Ks

Spend More Time on Your Business and Less Time on Taxes

A Wells Fargo^® Business Platinum Credit Card can help with everyday business purchases, like office supplies. With access to up to $50,000 and no annual fee, it's the smart alternative to cash, checks or personal credit cards that also separates your business and personal expenses. Plus, you can enroll in the optional Wells Fargo Business Card Rewards^® program and earn rewards points toward travel, cash rebates, merchandise and more.

Controlling the Variables

Controlling fixed expenses isn't hard to do—it's the variable expenses that can cause the true headaches. You can't predict them, but you can take steps to control them and prepare for the unexpected.

You know the difference between fixed expenses (those that don't change from one period to the next, like rent) and variable expenses (those that consistently change, like the cost of electricity or gas). Tom Egelhoff, CEO of Eagle Marketing and author of How to Market, Advertise and Promote Your Business or Service in a Small Town, notes that you can't always prepare for the external forces that cause variable expenses—such as emergency street construction that may lower foot traffic or a natural disaster—but that you can protect yourself and manage them to some degree. He offers a few tips that may help you get a handle on the variables:

Use your history—"If you've been in business for a couple of years or more, you have a variable expense history that can help you create projections," he explains. "List all the variable expenses from those balance sheets. Compute the highest amount paid and the average amount paid for each period and keep it handy. When the bill for that variable expense comes across your desk, compare it to the high and low for the corresponding time period. If the amount is out of line, do more investigating. One caveat: This method doesn't replace the need for an accountant or bookkeeping professional, it's just designed to help you gain an understanding of the variables and make changes where needed."
Re-think what might be "fixed"—There are certain things you think of as fixed expenses, like rent or insurance, that you might be able to lower. There's an old adage that says "if you don't ask, you don't get." A few examples include:

If you've been in your current space for a year or more, think about speaking with your landlord about renegotiating your lease. Basic rent is just one issue; there are other components of a lease that can help reduce your costs. (Check out "A Lease on Your Terms," on the Wells Fargo Education site to learn more.)
Review your insurance. Typically, you'll do it with an eye toward making sure you're fully covered, but an annual review can also show you where you might be able to lower some costs by, for example, simply raising a deductible. (Read "Keeping Up with Your Coverage," on the Wells Fargo Education site for more information on the areas of coverage you may want to review.)
"Taxes will always be a fixed expense, but the federal and most state governments offer tax credits and deductions for a wide variety of business-related functions, from the way you use energy to starting retirement programs and more," Egelhoff notes. "So ask your accountant about these breaks, because they can add up. And not taking advantage of them is like leaving money on the table." (To learn more about federal tax credits, check out Business Tax Credits at the IRS website.)

Keep on top of accounts payable and receivable—In general, keeping on top of cash flow helps control overall expenses. If you know your cash position, you know how an unexpected variable expense might affect you. "Streamlining Cash Flow," in this issue, offers more information on how AP/AR can improve cash flow.
Create a credit "safety net"—"Having credit in place can keep you from failure should one or a series of unexpected variable expenses come up," observes Egelhoff. "Whether it's a line of credit, credit cards or some other form, a credit safety net can see you through the tough times."

True expense control, whether fixed or variable, says Egelhoff, comes about when you become a "true student of your business. Work to understand your financials and learn to operate as efficiently as possible. And don't go at it alone. The best investment you can make is getting professional accounting assistance, so that you can put in place the budgets and numbers that give you the education about your business that you truly need."