The world of business has changed in ways that were unimaginable just a few months ago. The change has been coming for a long time. Still, with the recent pandemic, quick advances in the virtual office, sales, meetings, customer service, and other aspects of doing business have been thrust upon large and small companies alike throughout the globe. While this brought many technical and procedural challenges, it’s also changed the nature of business overhead costs.
Changes in Overhead Expenses
Through the COVID-19 crisis, we’ve watched as many businesses have converted some “normal” business functions to remote or virtual work, in part or as a whole. Business owners are increasingly re-thinking how they will function going forward, even after government restrictions are lifted. Many companies can, and perhaps should, consider changing or even ditching some of the current overhead expenses in favor of going virtual in whatever parts of their business they possibly can. Here are some things to think about when going virtual for your business:
- Employee workspace – The first and most obvious benefit of switching employees to working remotely is that the company no longer supplies space for employees to work. They can often effectively work from home. Your overhead no longer requires that you provide extra rooms, cubicles, enough bathrooms, or employee lounges. Your primary location can be quite a bit smaller, depending on the scope of your new virtual business model.
- Brick and mortar locations – Your company may not need a specific walk-in location, such as an office or storefront. If your business does not explicitly require that customers come to you, giving up a brick and mortar address will significantly reduce your rent and operations expenses. Depending on your industry or business, you may still have to keep a workshop, garage, or warehouse, which of course, remains as overhead.
- Utility cost – Having no brick and mortar location or even a reduced office size due to having employees working remotely and products needing no showroom reduces utility costs such as electricity, water, company internet, and phone services. If you are operating out of a home office, you are only supplying these amenities for yourself instead of an entire staff.
- Office equipment and software – Depending on your industry, you might supply some of your employees’ office equipment and software. If your remote employees work on the internet and the telephone through company systems, you’ll account for the expenses of setting them up at home.
- Employees as remote workers – In many cases, even when your employees do their work at home, needing your HR department and paying payroll taxes might not change. However, in some cases, you may hire remote workers as subcontractors, also known as virtual assistants. Doing so would eliminate the need to pay benefits or include them in payroll taxes.
- IT personnel and equipment – More than ever, the company will need to have a dedicated IT employee or department, even if they work at home, with a virtual business. Once you are committed to being online to a greater extent, you should consider this an essential expense. If your system goes down, everything stops.
Myrick CPA can help you sort out your budget planning when transitioning to a partial or complete virtual business. We also understand the tax ramifications and how to maximize the advantages of doing business online. Call our office or go online today to schedule your free consultation.