Running a business is about making money and ensuring everything is running as smoothly as possible. Sometimes, though, it’s easy to get caught up with a myriad of other things and not notice that your business is haemorrhaging money. Here are some reasons your business might be losing money instead of making it.
Business processes that take a lot of time or are done in a convoluted way could lose your business money. For example, if your document storage process involves scanning all your old documents into your new computer system, this takes up a huge amount of resources when you’d be better off using the services of specialists such as Kelly’s Storage who would make sure your documents are safe and secure with minimal effort.
Improper credit control
If you let your customers have credit then you need to enforce payment deadlines and spending limits. It might be something a simple as a business forgetting to pay that can make you miss a payment and incur a charge. Make sure you send out reminder letters and emails to businesses who need to pay their credit bill. This will minimise missed payments and will stop anyone taking advantage of your goodwill.
Not shopping around for suppliers
Even if you’ve been with a supplier for a long time, there’s no reason you can’t shop around for a new one. This goes for things like utilities as well as products and materials. Perhaps you can renegotiate a deal that’s more in-keeping with recent price changes, or you can start buying in bulk to bring costs down. Of course, there might even be a company out there who’s doing it cheaper than your current supplier.
Failing to keep an eye on profit margins
The key to making money in business is low costs and high margins. If you are constantly changing how your business works by bringing in new suppliers, the latest technology and hiring new staff, you can narrow your profit margins so much that you begin to lose money.
Even if you’re very careful with your spending, you can start to narrow those profit margins by offering too many discounts and sales.
Not measuring ROI
Advertising and marketing can really cut into what money your business does have. If it brings in new customers then great, but not everything you try will be effective.
You need to measure the return on investment (ROI) of your different marketing activities. It’s okay to try something that doesn’t work then to stop immediately but it’s when you’re spending money on long term advertising that’s not working that you can really get stung. Every month, or few months, look at your marketing activity to assess what’s working and where your money should be going.
You can measure ROI by using tracked links on banner advertising and social media or with special phone numbers and discount codes on print advertising.
To stop your business losing money, you should keep an eye on everything that goes in and out. Don’t just bury your head in the sand when it comes to your business’ finances.