The Federation of Small Businesses (FSB) estimates that there were 5.5 million small businesses in the UK at the beginning of 2021. As an entrepreneur, one of your main responsibilities is to keep your business afloat – with steadily increasing profit. Therefore, it is critical to take a closer look at your business to identify and seal areas where money might be seeping out to prevent further losses. Here are some ways your small business may be losing money and how you can stop it.
Your team is undoubtedly crucial to every aspect of your business, so they can cause your company to lose money in various ways. For instance, time-wasting may be a big concern for companies since some workers might spend significant time on non-work related activities. Consequently, consider monitoring computer activity and blocking social media sites that your employees are likely to waste time on, like YouTube and Facebook.
Employee theft is also a serious problem that costs UK businesses about £190 million annually. However, you can reduce your losses due to employee theft by putting various people and processes in place to monitor inventory, expenses, and bank accounts. Finally, you may be losing money due to an unsafe work environment. Fortunately, you can hire experienced health & safety consultants to draw up safety programs that address hazards around the office. This way, you can reduce the frequency of serious workplace accidents and their accompanying losses in insurance compensations and other expenses.
Underestimated product and job costs
As an entrepreneur, you undoubtedly calculate how much it costs your business to perform a job before accepting it. This task sounds simple enough, but many experts agree that it is easier said than done. Every project has obvious hard costs like resources and materials and hidden soft costs like times. Entrepreneurs are undoubtedly risk-takers, but gambling on the costs of your products and services should not be one of the risks.
Consequently, always calculate the actual cost of jobs you have completed recently to better estimate the costs of future ones. This way, you can have accurate estimates and bids that ensure that you receive full payments for every work without losses due to cost miscalculations.
Late and missing payments
It isn’t uncommon for entrepreneurs to offer goods and services to clients without accepting immediate payments. However, consistent late and missing payments can put a significant strain on your company’s finances, causing you to lose money. It is crucial to remember that your business essentially becomes a lender anytime you are awaiting payments.
You could also be forced to borrow money as a result and may be the one small business out of seven that cannot pay employees due to cash flow issues. Therefore, review how you receive payments from customers to prevent any money wastage. For instance, you can charge a service fee for late payments and update your collections procedures to bridge the gap.