How To Save Money as a Small Business Owner in Louisiana

According to the U.S. Bureau of Labor Statistics (BLS), over 20% of small businesses fail within the first year nationwide. For Louisiana specifically, the outlook is a lot more positive. As a state, we rank below average in first-year business failure rates. The same report also finds that Louisiana has one of the highest small business success rates in the U.S.

Great news! But is it a good time to rest on our collective laurels as small business owners? With economic uncertainty abound, probably not. It is a good time, however, to build on this positive momentum by focusing on improving the areas we can control within our businesses.

And this leads us to one of the top reasons for small business failure: poor cash flow management. Poor cash flow management undermines long-term stability, preventing you, as a small business owner, from building a financial safety net. A financial safety net that could otherwise help your business weather emergencies, seasonal lows, and economic downturns.

To improve your cash flow management, you can learn the financial literacy foundations that free up profit to reinvest back into a business savings fund. By the end of this article, you will know:

How To Save Money When Running a Small Business (in 10 Steps)

We’d be lying if we told you the process you’re about to embark on was glamorous or even fun. But it will help you plan for the long term, stabilize your finances, and build that all-important business safety net. It will also give you a little peace of mind, which can be hard to find as an entrepreneur. Without further ado, here’s how to save money as a small business owner in Louisiana.

1Separate Your Business and Personal Finances

When you run a small business, so many aspects of your life overlap. Sometimes this crossover is out of your control. Your kid gets sent home from school or daycare, and there’s no one else to look after them… it doesn’t matter what business plans you had that day, it’s on you. What if an employee calls in sick and there’s no one else to cover? Say goodbye to your personal plans unless you want your business to grind to a halt that day.

There is, however, one area of your small business and personal life that you have a little more control over: how you organize your finances. Even if there’s some natural overlap between your business and personal finances, you should try to separate them as much as possible. Why does this matter?

Separating your business and personal finances makes it easier to:

• Keep track of your business expenses
• Find areas to cut spending
• Track your profitability
• Avoid paying high bank fees
• Build a business foundation that saves money in the long run

2Choose the Right Business Bank Account

It’s best to use a high-interest, instant-access savings account that’s separate from your household account. A high-interest account means your money will earn money over time. Instant access means you can still get to your funds when you need them.

3Keep Accurate and Up-To-Date Financial Records

It’s not the most enjoyable part of running a business for most. But keeping accurate and up-to-date financial records will pay off in the end.

For a start, it will make it easier for you to track your business expenses. And that means you can start identifying areas where your business can reduce its running costs. Reducing operational costs will help you, as a small business owner, save money. And having accurate, up-to-date financial records will help you clearly see what you can actually afford to reinvest in your business savings each month.

Aside from that, good financial record-keeping can help you:

• Create a realistic budget
• Forecast your income
• Plan for tax liabilities

(It’s also going to lay the foundations for you to work through at least five of the remaining steps!)

4Create a Business Budget (And Stick to It!)

In its most basic form, a business budget should provide a clear overview of what income your business is projected to make (sales forecast) and what expenses you expect to cover in a year. Through your budget, you can then plan for tax liabilities, debt payments if needed, and, yep, your business savings.

There are a couple of different budgeting rules you can follow to allocate how you will use your profits. The 50/30/20 rule is the most common starting point. The 70/20/10 rule works better if your living expenses (including what you need to pay yourself) run higher. Here’s how each one breaks down:

5Audit Your Business Expenses

Having a separate business bank account, accurate and up-to-date business records, and a budget will stand you in good stead. You should now have enough financial data organized to clearly show how you spend money in your business in a typical month or year.

It’s probably going to be quicker (and give you less of a headache) to start with a general overview of your business expenses first, rather than getting straight into the details. To do this, take a glance at your business expenses over the last year. Is there:

• A pattern that immediately catches your eye?
• A recurring business subscription you don’t really use?
• Are you paying yourself more than you actually need some months?
• Is one of your suppliers on the more expensive side?

After you’ve zoomed out, narrow down to monthly expenses. Use your records and accounts to see exactly what is leaving your account every month. And ask yourself, “Does my business really need to spend money on this?”

6Reduce Business Outgoings Where Possible

Once you’ve audited your small business expenses, here are a few more ideas of how and where to reduce your outgoings.

Sticking with the New Orleans-based handmade candle store, another way you can reduce business outgoings is to renegotiate with suppliers every year. For example, if you buy a lot of ingredients year on year from a single supplier, it’s worth checking in with them to see if you can get a loyalty discount. You can also do the same with vendor contracts for services like insurance, high-speed internet, or electricity.

Another area to audit is your subscriptions. Are there any costly business subscriptions that you don’t use enough to justify the spend? If you can’t cut the subscription entirely, maybe there are “freemium” alternatives that you can use instead?

7Collaborate With Other Small Business Owners in Louisiana

Aside from helping to build an invaluable support network — running a business can be stressful and lonely at times — this step will help you uncover potential money-saving opportunities for your small business.

In the step above, we discussed renegotiating with suppliers each year. If you’re currently working with a national supplier, consider swapping to a local one in Louisiana. They might be more likely to offer better deals on bulk purchases of any supplies you need to run your business. You could even barter services or swap services to reduce costs between you.

Collaborative marketing is another way for small business owners in Louisiana to reduce costs. An example of joint marketing could be sharing a stand at a local marketing event, or even jointly hosting one. Aside from reducing ad spend, you can reduce operational costs by sharing a pop-up market stand during Mardi Gras (or a pop-up shop whenever, wherever).

Here are a couple of Chamber of Commerce Associations and Small Business Development Centers in Louisiana:

Chambers of Commerce in Louisiana

Small Business Development Centers in Louisiana

8Manage and Plan for Tax-Efficient Payments

Planning year-round strategic actions with your tax payments can minimize liability, optimize cash flow, and save your business money. But these strategic actions rely heavily upon you having your business finances in good order first by — yep, you guessed it — following steps one through five above.

It’s a good idea to get financial advice for your business from a local and qualified accounting professional, especially when it comes to taxes. There are, however, a few general actions you can take when it comes to planning for the most efficient tax payments in Louisiana, specifically:

• Differentiate between state-level sales tax and local/parish sales taxes. When accounting for both state and local taxes, Louisiana has the highest combined sales tax. Planning for these payments requires precise tracking, especially at the point of sale.
• Use electronic payments. Paper checks can cause payment processing delays. The Louisiana Department of Revenue (LDR) LA TAP portal enables timely processing, helping you avoid penalty fees.
• Estimate your tax payments. As a small business owner, your income likely fluctuates. Filing quarterly estimated payments through the LDR means you’ll avoid underpayment penalties at the end of the year.

9Access Louisiana-Specific Tax Incentives and Grants

Tax breaks, incentives, and allowances are ways that your small business can save money on tax liabilities. As with the step above, it’s worth getting financial advice from a Louisiana-based tax professional who can help make your tax payments most efficient without landing you with a hefty fine.

Small business grants are another way that your business can save money. Grants are usually non-repayable and can help you invest in your business, encouraging growth. Growth means you might have spare income to reinvest in your business savings.

When it comes to grants in Louisiana, many of them are only available to 501(c)(3) organizations, so most small businesses can’t typically access them. However, depending on what your business does and whether you are classed as a “culture bearer,” you might be able to access a grant from the New Orleans Tourism and Cultural Fund.

10Reinvest Back Into Your Business Savings Account

Phew… Steps one through nine have led us here — to the point where (hopefully!) you have spare profits to reinvest into a savings fund for your business. If you don’t have any savings yet, a business emergency fund is a great place to start. A business emergency fund typically covers things such as rent, utilities, and unexpected repairs during low-revenue periods or unforeseen crises.

To keep it simple, start with a goal to save 10% of your business profits each month. If that’s unrealistic, set aside whatever you can afford, with the end goal of covering 3–6 months of your total business expenses.

FAQs on How To Save Money as a Small Business Owner

Learn How To Stabilize Your Business Finances With Flyte

When you run a small business, it’s easy to get so wrapped up working in it that you struggle to find the time to work on it. Trust us, we get it. We’re right there with you. That’s one of the reasons we run our Entrepreneur Empowerment Program remotely — so that small business owners in Louisiana can learn the skills to increase financial stability at a time and place that suits them.

Flyte’s program empowers Louisiana-based entrepreneurs to build long-term security in their business through jargon-free financial education. Over 12 to 24 months, we teach you what really matters in money, like separating your personal and business finances and building emergency funds for work and life. If you’re an entrepreneur in Louisiana, we’d love for you to apply.

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