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These Small Business Costs Are Coming In 2021. Here’s How to Avoid Them
As the saying goes, hindsight is the best insight to foresight.
When the pandemic us in 2020, no one had the luxury of hindsight. Today, we can make an assumption of the small business costs ahead of us and learn to navigate around certain icebergs in advance.
This is the reason that despite the ongoing challenge, small business in the USA is growing and rebooting. To the extent that Q4 of 2020 became a breakthrough year for new online businesses.
But despite the ongoing impact of COVID, there are additional costs that entrepreneurs should keep in mind in 2021.
From payroll adjustments in most states to new IRS audits for small business, here are the small business costs to consider this year both related to COVID and not– and how to minimize or negate them in your own budget.
Payroll raises in 21 states
From the start of 2021, twenty-one states are increasing minimum wage requirements. Some of these increases are due to the annual cost of living adjustments, while requirements in states such as California, Colorado, Maine, and Washington are part of previously approved laws.
“As of January 1, the City of Emeryville, CA will have the highest minimum wage rate in the country, at $16.84 per hour, followed by Seattle at $16.69, while the highest state rate will be California’s at $14.00 per hour. New York and Oregon, which both have regional minimum wage rates, will see their highest wages reach $15.00 in New York City and $14.00 in the Portland Metro Area effective July 1, 2021. “
For small business, amidst uncertainty as to new 2021 COVID relief programs, this increase means more financial trouble in addition to the ongoing pandemic struggle. It also means a probable reduction in personnel.
How to minimize costs
Businesses that are growing despite the tough times have several options to keep their costs down while not sacrificing employee loyalty or service.
- Existing small businesses can apply for PPP loans until March 2021 to help with payroll expenses. Happily, even if you already secured a PPP loan in early 2020, you can apply for a second PPP loan in 2021.
- For growing businesses that need to hire during COVID-19, a good option is to look into remote workers and freelancers from across the country or even across the world. Outsourcing your tasks on a pay-per-hour basis is the best choice for non-local small businesses, online businesses, and tech companies. With the active competition and many new employees out in the talent pool, you can achieve both quality results and payroll savings by employing freelancers from around the world.
The costs of digital implementation
Digital transformation is happening and we can’t stop it. Some of the big digital investments entrepreneurs are making in 2021 are in remote work, team management, and time-management products. All of these remain non-negotiable and downright vital as we face another year of Zoom calls and remote working team software.
There is a lot of technology out there, and if you’re like me, you may have nearly a dozen chat apps alone on your phone: some for work, some for family, some for friends. Luckily, all of those chat apps are free. But your business apps often aren’t.
How to minimize costs
Innovation involves costs, and in 2021, small business needs to cut down on expenses without budget cuts and without sacrificing their team or business growth.
To avoid unnecessary technology costs don’t miss out on the following:
- Cloud products — Investing in software when you can use Cloud tools is a waste of budget. Cloud tools allow instant access to your whole team as well as remote workers.
- Scalable model — the most important part of digital implementation is finding the right fit for your business. It’s often the case that we see an awesome, famous product. But then we realize that for a team of 10 people, we never needed that kind of scale. Take Salesforce CRM, for example. Great product? Sure! Perfect for solopreneurs and very small business? Not really. Alternatively, if you are a small team you may best go for a starter solution like Hubspot free, or even a mini CRM built into your business phone system. The result? Usability and savings.
- Free trials — With all the marketing of products that we hear, it’s hard to know what to believe. The only real way to find out is to have a free trial of the product in question. Bottom line? Subscribe only to products and services where you can “touch to believe”.
- Integration — The “cherry on the cake”, integration is technology’s biggest time-saver. When accomplishing digital implementation in 2021, ask how well this product integrates with 3rd party apps, or with services like Zapier. This can make your life a lot less cluttered and save on additional costs.
Covid safety measures
Just count how much money you’d spent in 2020 on Lysol wipes, masks, and other disinfectant products. Seems like a trifle, but comes down to a lot if we take up pen and paper. That’s because Covid didn’t just hit the economy in huge ways. It also hit businesses, just like households, in unnoticeable ways that just add up.
As a business, you’ve had to worry a lot more about employee safety, PPE, contactless delivery, and other COVID-induced measures. The same is going to continue in 2021.
How to minimize costs
Covid-related costs won’t be going away this year, but you can minimize them in some ways by prioritizing remote work as much as possible for your business.
Since the savings of remote work averaging $11,000 per employee, you may actually balance covid-related costs out after going remote.
Find out more about smoothly transitioning your employees to remote work.
Increasing IRS audits
Much to the frustration of small business owners who already have enough on their minds, the IRS has announced its plan to audit more businesses in 2021.
IRS audits on small businesses are expected to increase by 50% in 2021, leading to possible financial burdens on legal expenses associated with these audits.
How to minimize costs
To minimize your probability of coming into the view of IRS for an audit, experts suggest doing a review of your tax records with pro guidance and making sure everything is transparent.
Digital accounting software for small business is extremely helpful in keeping your small business IRS records up to date and secure. It also helps you electronically file tax returns and stores important documentation in digital format.
If you have the slightest doubt about your small business taxes, it’s always best to hire an accounting professional who will check up on your records and make sure there’s nothing to worry about. Doing that ahead of time can save you on a whole bunch of legal fees — and incredible stress — in the case of an IRS audit.
Being prepared means being ready to fight. By keeping in mind these factors that may pressure your budget this year, you’re propping yourself up on a safety pillow to push business forward regardless of circumstances.
Want to learn more about budgeting in 2021? Check out this jumpstart guide to financial modeling — the business owner’s go-to growth tool.
And check out our out-of-this-world fast, mobile, and budget-friendly phone system for small business. We’ll help your team talk anytime, anywhere, and about anything, at a stunning price.
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