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Ways Your Small Business is Losing Money (and How to Get it Back!)

Some days it feels like there are more ways for your small business to lose money than to make money. Costs are constantly increasing on things like rent, employee wages, and electricity bills. So what can you do about it? 

We’re here to provide guidance by highlighting a few ways your small business may be losing money. And more importantly, we’ll tell you how you can get it back!

You Are Losing Money If Your Finances are Disorganized

This is key. When days get long and you’re short on time, do not skimp when it comes to order and timeliness with your finances. Keep accounts up to date by entering receipts correctly and make payments on time. Late fees and accumulated interest can balloon quickly. Keep your personal finances and your business finances separate – this means separate bank accounts and separate credit cards.

Failing to Review the Budget vs. Actual on your Financial Statements

Sometimes you won’t know that you have an issue until it surprises you on the financial statements. If your actuals are way off from your projections, dig into this. Figure out what’s causing the discrepancy. And then account for this when planning /or the next year. Your budgets should be a tool for your financial planning purposes. 

Accounts Receivable Aging

Stay on top of collecting your accounts receivable. This is money people owe to you – you want to make sure you’re not ignoring it! Follow up with late accounts and make it clear you will not allow late checks. Consider shortening your terms to n15 or n10 if this continues to be an issue.

Overhead Costs Going Unchecked

Keep your overhead costs in check. This includes all day to day expenses necessary to run your business not directly related to selling a product or service like rent, supplies, travel, and office expenses. Review these to make sure your costs are in line with expectations.

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You May Be Losing Money With Your Pricing Strategy

Pricing is tricky. How do you determine the appropriate cost for your product or service? As times change and the market shifts, evaluate this periodically. Consider a focus group or customer survey to get feedback on what customers would be willing to pay. 

Look at what your competitors are charging. Evaluate your breakeven point and use this to calculate the ideal price for your offering. Then re-structure your pricing to account for necessary margins.

You May Be Losing Money on Your Employees

There’s no doubt about it, investing in employees is an expensive endeavor. Because of this, many small businesses opt to ignore this area and scrape by with the bare minimum. But rapid employee turnover is even more expensive!

When you consider the high cost of hiring and employee retention, it’s not unreasonable to spend money on quality employee training. Consider higher salaries and year-end bonuses. Keep your employees happy! 

Happy employees give good customer service. So as you invest in your employees, you’ll also see a boost to your customer service strength.

You May Be Losing Money By Using Outdated Technology

Yes, new technology is expensive. You may have a POS (Point of Sale) system that’s been around since the 1990s and works fine. So why would you change it?

This decade has seen significant developments in business technology. There are now many different systems that streamline operations and provide the necessary elements for a business transaction with a minimal and aesthetic style. We’re not saying you have to change, but you should evaluate options. Customers like to see businesses that are relevant. 

In addition, you need to keep your data backed up and secure. You will certainly lose money if your customer data is compromised or if you lose important company data. Work with an IT company to get you set up for success.

You Are Losing Money If Your Business Is Not Online

It’s nearly 2020. Get online. With more businesses getting set-up online now than ever before, you simply can’t rely on word-of-mouth business alone. Even if you can’t sell your products or services online, you must have a website that describes your business, tells your story, and gives contact information.

You Are Losing Money If You Are Disorganized

There are ample online resources, many of them free, that can help you stay organized and prioritize business initiatives. Look at a few for reference: todoist and Asana. Not only are you losing money, you’re losing mental space which could instead be used to generate strategic business ideas.

Your small business may be losing money due to lack of organization, poor employee retention, ballooning overhead, outdated technology, or bad pricing strategies. With these tips, you’ll be getting that money back in no time! 

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