Small businesses have a hard time managing the cash flow with the evident expenses and limited budget. They run over the budget again and again to find the possible space for cutting some more cost. However, there some cash leaks that come as a surprise to the most carefully curated financial budget.
There are times when the problem lies in some business process, not the account statement. A little negligence from your side may cost you over a hundred or even thousands of euros each month. Here are some hidden cash leaks in your business that might have been causing additional stress on the business.
Financial Status: Slow Settling of Accounts
Your sales number may show some significant profits. Still, the company can run out of cash. The reason could either be overspending or not receiving payments from customers on time. You have to ask them, nudge them, or even financial charge them with late fees for money to run business.
The last date of payment should be more than what it takes you to pay the suppliers. Try contacting them with a phone call instead of a mail for effective communication. Also, introduce some discount or coupons for instant payment of the dues.
Paying Too Quickly
B2B transactions can take some time to complete based on your line of work. You may have to wait for the next entity in the chain to make payment for the suppliers. Therefore, ask the suppliers to wait until the payment is cleared from the customer end.
Many organisations have different payment policies for suppliers and customers. This is a significant reason for the difference in cash inflow and outflow. You can take bad credit loans in Ireland to pay if the amount receivables are not enough.
Hiring Too Early
Hiring employees is a sign of growth for small business that comes at a particular time. Early hiring means you are wasting essential resources, time and money. Therefore, you must have enough work in hand for a long time to start hiring employees in the business.
Prepare a thorough plan with all the metrics to make your business grow at a sustainable rate. Temporary increase in customers should never be associated with growth as it cause long-term consequences. If possible, increase the current staff’s responsibilities and manage the increased workload with some incentive scheme.
Wrong Estimation of Time
The traditional spreadsheets and paper clips are outdated measures of keeping track of your employee’s activities. You cannot have the accurate measures of the time they spend working for the business. Either they come late, leave early, or take long breaks without informing their managers.
You should invest in the digital systems that keep track of your employees’ activities and whereabouts. The tools will record the time they spend on the system. You are losing money on reduced productivity because of those non-working hours.
The tedious routine tasks take hours of necessary time from the schedule of your staff. So many of these tasks are unproductive, needless, and takes away the momentum at work. You can use technology to automate these tasks instead of forcing them to the employees.
The manual processes will be managed more efficiently with automation. You can rely on the modern-machinery to work for months with less maintenance. You will save money on the error-free operation while humans are bound to make some mistakes.
Using Credit Cards with No Cashback
Banks and private lenders offer special discounts for businesses because of their proactive spending. You can save some serious money on the purchase, travel, and bookings using individual credit cards. A little research on the internet will help you find the best card for your business.
For loans, lenders offer a personalised plan for the business based on their line of work. Car finance will have flexible terms and competitive interest rates if the business depends heavily on transportation. Try not to fall for the interest rate alone as difference charges may heavily increase the overall cost.
You don’t need a fancy coffee machine since the lower end model will make fine coffees. Also, a recycled paper will cost much less than the premium ones that fulfil the same purpose. All these examples are unnecessary expenses that drain money from your budget with no particular purpose.
You need to consider the miscellaneous expenses based on “needs” and “wants” to create a better budget. The small costs add up to a significant amount that can be put to better use. The primary expenses are something you should often reconsider with the stakeholders.
No Evaluation of Cash Flow
Budget for different tasks requires constant revaluation for optimisation and cost-cutting. Your marketing efforts need to be evaluated based on the returns from each platform. The organisational performance might require down-sizing if the employees’ cost is overtaking the returns.
Also, the problems with the cash flow can cause the money shortage quite often. Your customers may want more simplified payment process to settle their accounts. Also, it is recommended to record every expense on the digital system for proper evaluation.
Sticking to the Stuff
You have to accept the failure at times to prevent further damage to your company’s finances. There is some stuff you need to let go from the unrepairable car in the garage to the underperforming marketing strategy. Your stubbornness might lead to some severe loss of money over time.
A business should experiment with new technology and strategies. The successful companies are built over risks and hours of struggle. However, after a while, you must stop the experiments if there is no hope for improvement or profit.
To sum up, you need to find the hidden reasons for the cash drain to optimise the budget. Majority of the business owners neglect the smaller expenses to focus on the high operational costs. However, cutting-cost on the smaller ones are essential to complete the budget optimisation process.