Tips for cutting costs in your business

Keeping costs under control is crucial in today’s challenging business environment. Without a doubt, one of the quickest ways for a business to cut costs is through staff reduction. But cutting jobs is not always the best cost-cutting strategy. Drastic job cuts can lead to a vicious cycle of reduced productivity, followed by even slower growth and decreased profitability. Replacing skilled workers when times improve may be difficult, leaving your company to struggle longer still.

Here are some alternative cost-control strategies that companies could consider.

* Look at the cost of your office or plant. If the company owns expensive office space, consider moving to a less costly location that will not mean losing clients or business. If a move is out of the question, consider sharing office space with a compatible company. What you save in shared operating costs goes directly to the bottom line (after taxes, of course).

* Consider sale-leaseback arrangements, which enable the company to generate funds for operations and transfer the burden of ownership to the buyer from whom you rent back the office space.

* Review the cost of supplies and inventory. Analyze the cost of materials and supplies. Are you stocking too much material too far in advance? Can you arrange to have products shipped directly to customers by your suppliers?

Periodically conduct a competitive review of suppliers, and select those who can deliver good quality and service at the lowest cost possible. Also, you may not have to pay full price; inquire about volume discounts.

* Outsource some processes. Consider outsourcing certain activities that either consume a great deal of time and resources or are prone to errors. For example, you may be able to have payroll processing done by a vendor at a fraction of the current cost to you.

Act soon to cut your 2012 taxes

Time is running out to make tax-saving moves for 2012. Here's a sampling of ideas to consider.

* Maximize the contributions to your employer's tax-deferred retirement savings plan, thereby saving taxes immediately and deferring taxes on earnings in your account. Also don't overlook an IRA contribution if you qualify.

* If you've held appreciated stock for more than one year, consider donating those shares to charity rather than making cash donations. You'll avoid paying taxes on the stock's appreciation, but can generally claim the full fair market value of the stock as a charitable deduction.

* Adjust your withholding. Increase the income tax withheld from your paycheck through year-end to cover extra amounts due from Roth conversions or other taxable income increases in order to avoid underpayment penalties. Alternatively, reducing your withholding to account for an overpayment puts money in your pocket now, instead of next year when you file your return.

* Schedule charitable contributions. Cash and checks mailed by year-end count as 2012 deductions, as do credit card charges you make by December 31. Donations of appreciated securities are deductible when you relinquish control. Allow extra time for stock transfers handled by your broker or a mutual fund company.

* Make family gifts. For 2012, the annual amount you can give away to any individual, free of gift tax, is $13,000 ($26,000 when you're married and make the gift with your spouse).

* Plan for elective health care expenses. Use up the balance in your flexible spending account (FSA) by year-end, and figure out how much you'll contribute in 2013. No FSA? You still have time to set up a health savings account (HSA) and make a deductible contribution.

* Remember required minimum distributions. Failing to take a required distribution from your traditional IRA before year-end could cost you 50% of the amount you should have withdrawn.