5 Top Reasons Small Businesses Waste Expenditure
One of the main reasons a business can get into financial trouble is not necessarily that they are making too few sales or that the gross profit on sales too small. Usually we know our cost of sales and how many sales we are looking to make so it stands to reason that it’s all the other peripheral costs that are rising without you really realising it. Here are 5 of the most common reasons why your business may be spending less wisely than you should be.
Egotistical Spending Decisions
This one is often a difficult one to address as it requires looking at your own behaviour and objectively assessing your spending conduct. It’s naturally human to want to have nice things and show off how well you are doing, especially if you are the boss. But with making any business spending decision you should be asking yourself what the business reason for this decision is. Do you really need a top of the line PC, or the fanciest company car your firm can afford? If these items are not strictly necessary then think carefully if you can really afford them.
Excessive Employee Expenses
It can be a necessary thing to allow your employees to have expense accounts or company credit cards. But if you do allow this then you must be sure that they are not being abused and taken advantage of. For this you will require to have a comprehensive system keeping track of everything, employees should fill out forms and keep receipts and these should be checked before going into your book-keeping system.
Bills & Other Recurring Expenses
You can easily be spending too much on regular outgoings such as office costs, insurance premiums and subscriptions. If you have several vehicles or more then you should at least check your premiums and, if possible, look at the possibility of taking out fleet insurance. You can also save on your energy bills if you check and if you have a reasonable size of premises this can be a huge saving.
You will be spending a certain amount on marketing but are you spending that money wisely? When taking out any advertising do you know who your target audience is and are you reaching them effectively? If you are getting a high number of views of your adverts but they are being viewed by people who are not interested in your services then it’s pretty much just money down the drain. For each advertising campaign have a checklist of who buys the product or service and where to reach them. Also if you are making any offers through advertising have a redemption code to track who is responding.
You will want to be sure your staff are giving you good value for money. Do you have ways of monitoring their performance and what to do if they are not? Make sure you have explored who they are and if they are the correct people for their positions, and that they are doing what they are tasked with, even when working unsupervised.