Your Business Is Leaking Money, And Here Are The Main Culprits

One of your key concerns, as the owner of a business, is your cash flow. This is a term that describes all the money in your company. More to the point, it’s the amount of money coming and going from your business. Ideally, you want a positive cash flow as this means more money is coming in than going out. Generally speaking, a positive cash flow equals a profit.

However, if you run the numbers, and find that you’ve got a negative cash flow, this means your business is spending more money than you’re making. Somehow, somewhere, your company is leaking money. As with all leaks, they can start off quite small but quickly grow into a huge and devastating flood.

If you don’t figure out what’s causing your business to leak a lot of money, then the amount you spend will gradually add up over time. This will inevitably end with you making loss after loss after loss. Where do you think this puts your business in the long term? It puts you in the ground amongst all the other small businesses that fail.

So, where is your business leaking most of its money, and how can you prevent this from happening? The majority of the time, the things listed below are the main culprits.

Pexels

Monthly Office/Business Premises Costs

Unless you work from home, your business will end up with a huge list of different premises cots to pay every month. The majority of you will probably work in an office, and this can throw up so many different expenses. Primarily, you have office rent to deal with. This is a regular monthly cost, and it can be incredibly large if you’re working in a prime business location. The irony is that prime business locations are supposed to help enhance your business and improve your reputation.

Can you lower your rental costs? Yes, there are different ways of doing so as well. For office-based businesses, you could try getting everyone to work from home and completely abolishing all office costs. Alternatively, you could downsize to a smaller, cheaper office in a less desirable location. To compensate, you could pay for a virtual business address, which gives you the address of a professional and desirable location. Even though this seems like an added cost, the combined cost of this and your cheaper rent will be less than your current rent.

Another cost to consider is the energy bills in your premises. This often comes as a separate charge alongside your rent, but it’s also there for anyone that owns their office. If you own the office building, then you’ve at least not got rent to pay for – so this is another solution for getting rid of the high rental costs. When you consider all the electricity you’ll use every day, alongside the heating bill, the money soon adds up.

Naturally, there are many ways you can lower your office energy bills. For one, use laptops instead of computers as they use up far, far, less electricity. Secondly, there are lots of companies out there like Retracom that provide insulated roofing for business premises. With something like this, you help control the temperature in your office and have way less expensive heating and cooling costs.

All the solutions mentioned here are so, so, simple. Plus, they all help tackle a key cause of your negative cash flow. By lowering your regular office costs, you’ll see less money leave your business.

pxhere

Employee Costs

No doubt the biggest business expense you face is the cost of your employees. People don’t work for free, and they can have additional costs aside from their wage. You’ve got to provide them with certain benefits, like sick pay, and possibly even health care plans or a pension fund. The result is that you spend most of your money getting people to work for you.

What’s the solution? Do you just fire all your employees and go at it alone? Of course not, you need them to provide the best level of service possible for all your customers. What I will say is that you can maybe assess certain jobs and see if they’re necessary or not. One good idea is to try and merge two roles into one job. If you have a receptionist that answers phones, and someone that manages the payroll, can’t you just merge the two? Train your receptionist to use your payroll system and pay everyone on time every month. Now, instead of paying two people two separate wages and benefits packages, you only have to pay one person. This idea alone can save you an absolute bucketload of money.

Alternatively, think about hiring people as freelance, self-employed workers instead of actual full-time registered employees. Again, this saves you so much money. Firstly, as freelancers, they can work from home. This helps you lower those office costs by allowing you to downsize! Secondly, as freelancers, they don’t require any additional benefits aside from their wage – you don’t even have to give them sick pay. As a business owner, there’s nothing more frustrating than paying people to essentially not work. Think about it, employees usually get 28 days holiday every year. Now, imagine you pay your employee $50 per day (this may be unrealistic, but let’s just use it to make a point). $50 times 28 days is….$1,400. Now imagine you have ten employees all on that same wage, and you spend $14,000 per year on their holiday pay. If those ten employees were suddenly freelance employees, then you’ve just saved at least $14,000 on holiday pay alone.

Don’t assume that you’re stuck with high employee costs forever. If you apply these tricks and tips, you will greatly lower the cost of your staff, plugging up one of the biggest leaks in your business.

pixabay

Marketing/Advertising Costs

Companies spend a lot of money trying to market and advertise their brand. This is all well and good, but only when the money you spend results in worthwhile results. If you’re not getting a good return on your investment, then you’re pretty much throwing money away.

The mistake many business owners make is they assume you need to spend big bucks on a snazzy marketing campaign. They’ve seen the like of Apple and Samsung invest heavily in the marketing side of things, and think this must be the way to go. I’m not saying you can run an entire marketing strategy for free – money is needed to pay for many different techniques and ideas. However, I can pretty much guarantee that you’re spending way more than you need to.

How do you stop this? The first thing you should do is run an audit on the marketing/advertising side of your business. This helps you figure out which things are more effective than others. Doing this could show you that some paid marketing techniques just aren’t working, and should be scrapped. Right away, you’ve saved money. Also, it can help you decide where most of your marketing budget should go. If you spend money on things that yield results, this will ultimately help you bring more money into your business. Therefore, you generate a positive cash flow.

Another thing you can do is try as many free techniques as possible. Word of mouth is still highly effective for local businesses, and the internet has made word of mouth even more effective as well. Nowadays, someone can say something positive about your business and thousands of people may see it. By using as many free methods as you can, this reduces the need to spend money on other marketing ideas.

You’ll never be able to stop spending money on marketing/advertising. But, you can definitely reduce what you spend, while also ensuring you get a good return on your marketing investments.

Flickr

Taxes

Listen, every business needs to pay its taxes, and I’m not about to say you should start dodging them. Having said that, you can probably pay a lot less than what you’re currently paying now. Every year, your business may shed a load of cash on taxes, and it can hurt your cash flow. So, it’s time to get clever and find ways of reducing your tax (within the confines of the law of course!).

Loads of big businesses do things like this to whittle away at their tax bill. One of the easiest things you can do is claim back on expenses. You’ll be shocked at how many expenses you can claim on, which results in lots of money getting taken off your tax bill.

To add to this, you can save so much money by simply understanding how to properly fill in your tax return forms. If you do this incorrectly, then you can so easily end up paying way more than you need to. With a little bit of research and a bit of help, you can fill the forms in properly and pay less.

Is your business getting hurt by a negative cash flow and so many needless expenses? Then use the advice in this guide to help reduce the money leaving your business and push you towards a positive cash flow.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.