Just like all living things need water, businesses need revenue to thrive. If your company loses money, then it’s clear that something is wrong with how your finances are being managed. In this article, we will tell you about five hidden ways your business is overspending and how you can stop spending more than you should.
1. You don’t keep track of your expenses
You may be shocked to find out how many businesses don’t know how much they spend for utilities, salaries, incentives, banking services, and rent. If you’re a part of this cohort, not tracking these expenses can become a huge problem because at some point you may start spending more than you earn and still remain unaware of it.
What you can do: Collect information about your expenses during the last few months and start monitoring your expenses monthly. When you sum up your results at the end of a month, you can figure out what you will be able to save on. Maybe there is an office space for rent that’s cheaper than your current location, or you can save some money by switching to a free online bank account where you can open bank account online. There are always ways to cut redundant expenses if you know exactly where to save.
2. You accumulate debts on your credit card
Credit card debt should be taken very seriously, especially for a business. Credit cards can be a useful tool for paying for short-term bills and getting some bonuses, but large interest rates bite off a big slice of your budget. If you fail to pay your debts on time, your business will begin losing money like a bat out of hell.
What you can do: Paying off your credit card debt should be a number one priority. Start with increasing monthly payments. If a debt is very large, you should reconsider your budget and try to convince your bank to lower the interest rate.
3. You don’t have money for a rainy day
We understand that you must make every cent work for a sake your business. However, everyone should stash away money for a rainy day and a business is no exception. Unexpected rough goings happen to everyone, and when it comes to your business, it’s possible that such situations will deprive you of the opportunity to make revenue.
What you can do: If force majeure does happen, to avoid harsh decisions in despair your business needs an emergency fund. Transfer a small portion of your profits to a special account for the extreme cases or invest into highly-liquid assets that you can cash in within a couple of days.
4. You don’t negotiate
In the B2C world, buyers rarely negotiate the price of products or services, but in the business world this happens all the time. If you don’t bargain with suppliers, vendors, and contractors, and don’t ask for discounts and bonuses, then you’ll simply be overpaying.
What you can do: Do not be afraid to bargain. The suppliers are used to it, especially with bulk orders. If your supplier is not ready to make small concessions, maybe it’s time to think about finding a new contractor.
5. You try to keep up with your competitors
Has your business competitor recently moved to a posh office in a skyscraper? Or have their employees received the latest gadgets? All this may become a reason for envy, but it doesn’t mean that your business should go down the same road or is slipping. If you keep up with the Jones and splurge on things that are impressive but not necessary, it’s a direct way to sink your business.
What you can do: Buy only things that your business needs and not what you want. Used furniture and leased equipment can work just fine and they won’t leave a hole in your pocket. Customers are often impressed by frugal decisions rather than flashy spending.
It’s not that hard to figure where your business spends more money than it should. Just look at your monthly expenses and be honest with yourself about how money is spent. By abandoning such surpluses, more money will become available to invest in the development of your business.