As a business owner, you know the importance of keeping a close eye on expenses.
After all, for a startup or small business, cash flow is everything. In fact, according to a study by financial services company U.S. Bank, as many as 82 percent of startups and small businesses fail due to poor cash-flow management.
While it may seem like money simply vanishes into thin air at times, we all know that the truth is that it’s going somewhere. Finding out where, exactly, your money’s going is important for maintaining a healthy income and expenses ratio, and to ensure that your company stays out of the red.
Taking a closer look at your operations and money management procedures, and making changes when necessary can help you to stay solvent. With this in mind, let’s take a look at a few common areas where small businesses tend to lose money.
- High Employee Turnover
While you might not realize it, keeping your current employees happy costs less than trying to recruit and train new ones. Not to mention there’s also the costs of downtime or additional stress that you and other employees will be under while having to pick up the slack. Bringing on a new employee is costlier than you might think and having a high turnover rate can cost your company more than it should. Instead, look to keep your team engaged and motivated at work. You’ll be able to benefit from lower turnover, higher levels of productivity, and happier customers too.
- An Outdated Time Tracking System
Another area where small companies tend to lose money is a lack of accountability when it comes to tracking employee hours. Relying on old fashioned timesheets makes it easier for less-than-honest employees to round up their hours, or overestimate time spent on projects. It also requires someone to enter the data manually into the payroll system, and leaves rooms for mistakes and potentially costly errors. Having a robust time tracking system in place can automate much of the work involved with time tracking and payroll processing. It’ll also help to ensure accuracy and reduce the chance of time fraud as well.
- A Lack of Organization
Organization in the workplace may not be something that you consider essential, at least not for your bottom line, but when it comes to organization, a lack of it can cost your company money. Consider that time spent searching for something, is time wasted. According to one study by Express Employment Professionals, out of 18,000 business leaders, 57% said they lose six working hours per week as a result of disorganization. Those hours can quickly add up. To combat this, make sure you implement systems at work to help keep everyone on the same page, and continually look for new ways to streamline processes and communication.
- Poor Accounting
To have any shot at success with your small business, you must have a firm grasp on your finances. If you don’t know how much you spend or where your money is going, then how can you make changes to better your company? There really is no room for error when it comes to finances. While programs like QuickBooks make it easier to manage your finances, if you’d rather not spend time working on the books, consider hiring someone to take over the job for you.
- Ignoring Outstanding Accounts
Ignoring outstanding accounts is another area where your company could be losing money. While it’s easy to ignore and forget about open balances and accounts, don’t make this mistake. If you aren’t being proactive about collecting payments from your clients or customers, then you could be setting your cash-flow up for a serious decline. After all, if your clients know that you won’t be charging a late fee, then what incentive do they have to pay you in a timely manner?
Often areas that you’d least expect can end up costing your company significantly. Inefficiency, wasted resources, and losing customers due to poor service, for example, could all prove to be damaging to a company’s bottom line. By continually monitoring your company, and looking out for areas where money and resources are being wasted, you can help to ensure that your business stays afloat.
