Updated Checked by the Tax-Services.ca editorial team How we check
Cost cutting with an accountant starts with a fact that surprises owners: a dollar you save doesn’t all stay in your pocket, because lower expenses raise your taxable profit. Cut $20,000 from a small Ontario company’s costs and about $17,660 of it remains after tax, at the rate the calculator uses.
Where do you find costs worth cutting?
Start with the largest lines, not the easiest. Rent, wages and the top few suppliers usually hold most of the money. Trimming subscriptions feels productive and rarely moves the result.
Ask your accountant for a month by month expense report over the last year, sorted from biggest to smallest. Look for lines that grew faster than sales, since those are where a habit or a supplier’s price rise has crept in without anyone deciding it. Then look for lines you can’t explain. There’s often one.
Share a single set of books with them, updated monthly. You can’t cut what you can’t see, and stale books make every conversation about last quarter.
What does a simple cost review look like?
Nothing fancy. Set aside a morning, bring the expense report, and work through it in order.
- Rank every expense line from biggest to smallest and circle the top five.
- For each one, write down what it buys and who decided to buy it.
- Ask the supplier for a quote from a rival, or ask your current one to match it.
- Cancel or shrink one thing at a time, so you can see what each change does.
- Check the result against the next two months of books before you touch anything else.
Changing one thing at a time is dull, but it’s the only way to know which cut helped and which one quietly hurt.
How much of a saving do you keep after tax?
Take a Canadian-controlled private corporation in Ontario with $300,000 of taxable income. The corporate tax calculator shows $35,088 of tax. Raise that income to $320,000 by cutting $20,000 of costs and the tax becomes $37,427.20.
| Taxable income | Total corporate tax | Left in the company |
|---|---|---|
| $300,000 | $35,088.00 | $264,912.00 |
| $320,000 | $37,427.20 | $282,572.80 |
The extra tax is $2,339.20, so the saving keeps $17,660.80. That’s at 11.7%, a blend for a calendar 2026 year that no government has published, because Ontario cut its small business rate on 1 July 2026. Treat it as an estimate, and expect a different answer if your year end isn’t December.
A handy rule of thumb falls out of this: every $1,000 you cut keeps roughly $883 in the company. Above the $500,000 small business limit the picture worsens. The tool shows a combined 26.5% rate there, so a $20,000 saving would keep about $14,700, or $735 of every $1,000. Associated companies share one limit, and the tool ignores that.
What does a payroll cut really save?
More than the wage. For an Ontario employee paid $2,000 every two weeks, the payroll remittance calculator shows $156.63 of employer CPP and EI per pay period. The company pays $2,156.63 for that one job each period.
Before you cut hours, check what you lose in sales. A cheap saving on payroll can cost more in missed revenue. Overtime is worth a look first, and so is a change of shift.
Employment rules also apply, and they vary by province. Check with the provincial labour ministry before you change hours or pay, because what’s allowed in Alberta may not be allowed in Quebec.
What cost reduction strategies work for a small business?
Business owners who want to save money usually start by cutting the wrong things. A good cost reduction plan separates three groups: costs that earn their keep, costs that drift upward without anyone noticing, and costs that can stop with no effect on customers. Your accountant's reports show which group each line belongs to.
- Subscriptions and software: list every recurring charge and cancel the ones nobody has used in three months.
- Suppliers: ask for a second quote on your largest purchases once a year, and compare delivery, terms and price together.
- Insurance, phone and utilities: renewal is the moment to ask for a better rate.
- Staff time: look for work done twice, such as retyping invoices, since time is often the biggest cost.
- Waste and returns: stock that sits unsold ties up cash long before it shows up as a loss.
Think about the long term as well as this month. Cutting training, marketing or equipment repairs can save money now and cost sales later. Say you cancel a $400 a month marketing service and sales fall by $1,500 a month at a 40% margin. The saving is $400, the lost profit is $600, and the cut costs you $200 a month. Test a cut for a short period and compare the results before you make it permanent.
Small business owners often ask for a number to aim for. There is no single right percentage, because it depends on your margin and your costs. Set a target for each line, write down who owns it, and review it with your accountant each quarter so the savings stay saved. The figures here are examples, so use your own.
Is cutting costs better than raising prices?
Sometimes. Say an item costs $60 and sells for $100. Trim the cost by 5% to $57 and margin rises from 40% to 43.0%. Raise the price 5% to $105 instead, and margin becomes 42.9%.
They’re almost equal on paper. In practice a price rise can lose customers and a cost cut can lower quality. Run both through the profit margin calculator and let your accountant tell you which one the numbers favour.
Fixed costs behave differently from per unit costs. Cut a fixed cost and it helps every sale.
What mistakes and limits should you watch for?
Cutting something that earns money is the classic one. Marketing looks like a cost until sales fall, and by then the customers who stopped calling are hard to win back, so ask your accountant to tie each line to the revenue it supports before you touch it.
Also watch the timing of tax deductions. Some purchases are claimed over several years and not in one, and your accountant will know which. Paying a bill earlier or later can shift when the saving arrives, and the calculator can’t model that.
The budget calculator helps for a rough personal or household split, but a business needs its own books.
Official page on this topic: BDC: How to write an effective business plan.
Sources, and how we checked them
Tax figures come from Canada Revenue Agency corporate tax rate information and 2026 provincial data checked in September 2026, run through the calculators on this site. The Ontario small business rate for 2026 is a derived blend. This page gives no supplier savings, software prices or fee levels because none could be confirmed. It’s an independent guide, separate from any government body.
Frequently asked questions
Do I keep all of a cost saving?
No. Lower expenses raise taxable profit. In the Ontario example, a $20,000 cut keeps about $17,660 at the estimated 11.7% rate.
Which costs should I look at first?
The largest lines: rent, wages and your top suppliers. Trimming small subscriptions rarely changes the result.
What does an employee cost on top of the wage?
In Ontario, a $2,000 biweekly wage carries $156.63 of employer CPP and EI per pay period, so the cost is $2,156.63.
Is cutting cost better than raising prices?
It depends on your margin and customers. On a $60 item priced at $100, a 5% cost cut gives a 43.0% margin and a 5% price rise gives 42.9%.
Is the 11.7% rate certain?
No. Ontario cut its small business rate on 1 July 2026, so the 2026 rate is a derived blend and your year end may change it.
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