(This column originally appeared in the Inquirer)
The price for a gallon of gas in Pennsylvania has risen from $3.41 to $4.15 in just the past year, and it’s likely small businesses will be dealing with much higher energy costs for the foreseeable future.
In addition to higher costs at the pump, utility prices are increasing and projected to skyrocket over the coming months.
So how can you insulate your business from these higher costs? Here are a few tactics to consider.
Work from home and cut back on travel
Wherever you stand on work from home, put the issue aside temporarily and allow your employees to work more from their home offices. It will save them money on gas and put less pressure on you to reimburse them for higher fuel costs, as some of my clients are considering.
Airfares have also significantly increased and are expected to stay elevated in the coming months, which should encourage you to hold more meetings online and avoid unnecessary travel.
Pay for commuting
The IRS allows employers to deduct up to $340 per month to reimburse their employees for commuting (which can include both transit and parking).
The employee doesn’t get taxed for this payment. It’s an affordable way to help your employees and keep them coming to the office.
Get an energy audit
Peco provides a number of free and low-cost services for small businesses and consumers to assess their energy use. The utility company also offers discount incentives, energy efficiency advice, real-time and customized energy reports, and online tools to benchmark energy usage.
The company will also suggest ways to maximize rebates and for getting grants for converting to natural gas or for the use of solar power and electric vehicles. They also provide tips on getting incentives to install qualified, high-efficiency natural gas furnaces and/or boilers. A 30-minute conversation can set the path for more energy savings in the months to come.
“Our small-business solutions program is directed at small-business customers that may typically lack the time or financial resources necessary to investigate and pursue energy-efficiency upgrades,” said Shannon Christie, a senior energy efficiency program manager at Peco. “By participating in this and other programs, our customers see a direct benefit through reduced energy use and bill savings.”
Replace your glass
Replacing old windows is a big investment, but it can be worthwhile. “Heat gain and heat loss through windows are responsible for 25–30% of residential heating and cooling energy use,” says the U.S. Department of Energy.
Replacing your building’s windows may not be cheap, but there are potential tax deductions for doing so and the long-term expense reductions could significantly outweigh your cost.
Revisit your thermostats and HVAC systems
Your office and warehouse should be equipped with automatic thermostats that will reduce human reliance (and error) and provide a more consistent environment. These systems automatically adjust heat and air-conditioning depending on conditions, raising or lowering temperatures by zone and reducing wear and tear on your heating and air-conditioning systems. Setting your temperatures a little higher in the summer and lower in the winter will help reduce bills, and encouraging the use of fans or portable heaters at a desk can be less expensive than heating or cooling an entire building.
You should also consider upgrading or replacing your existing heating and air-conditioning system if it’s more than seven years old and take advantage of both depreciation and energy-related tax incentives that will help defray that cost.
Replace your lighting
According to recent Department of Energy and lighting industry reports, LED (light-emitting diodes) light bulbs use at least 75% less energy than incandescent, halogen, and fluorescent lighting. And LED bulbs last 25% longer.
Like some of the other investments mentioned above, there are potential tax deductions and incentives available for lighting replacement that could help offset their cost.
Scrap your inventory
Many of my clients have excess inventory in their facilities, which negatively impacts them in a few ways.
For starters, the inventory is taking space that could be used by higher-turning items. They’re also occupying areas that may not be needed, so that scrapping that inventory could allow a business owner to close off or rent out that area, which would significantly reduce the cost of heating and cooling. You’re allowed to take a tax deduction when you scrap your inventory.
Get a freight audit
Shipping and logistic companies are being hit hardest by higher gas prices, with the cost of diesel fuel rising 50% in the past year. They’re understandably passing this cost down to their customers, but you can fight back by taking a closer look at your freight bills.
Local companies like TLI can help uncover duplicate invoices or incorrect rates, weight miscalculations (a huge hidden cost), fuel surcharge errors, missed service refunds (late deliveries), and when contract pricing is not honored. Some studies indicate the average invoice error rate in the freight industry is 5% to 8%.
“We have artificial intelligence to audit the invoice,” said Joseph McDevitt, the company’s director of marketing and business development. “In addition to these services, we can help if a carrier damages a shipment by covering claim resolutions for a client to get them their settlement checks or provide them additional insurance and cargo liability coverage so that their shipment is fully insured.”
