How Small Businesses Waste Money
By Charles Hopkins
Published 09/20/2007 | Entrepreneur
Most business owners subscribe to the thought that you "must spend
money to make money". This can be true, but you also must know exactly
where that money is going and the results it brings. A small business
owner never has any money to waste.
Some ways that your business might waste money includes the following:
1. Manage your credit cards - If you have several cards, develop a
computer program that will show you the exact balances, due dates, and
the interest rate you are paying. Always be aware of other
solicitations that save you money and possibly change your balances
over to a new company. If you have any employee cards, see if you can
set a limit on them. If not with the credit card company, make sure
that the employees know their limits. Manage your credit cards wisely
and never, ever miss a due date.
2. Develop an annual plan so you know where you will spend money.
This helps you in several ways. The business person will be aware of
what portion of the profits are going to advertising, towards
incentives, towards accounting and other internal expenses, etc.
3. Do not over-purchase any products or services for a business. If
you buy in bulk, the money is tied up and a place must be provided to
keep the extras. That might be an unnecessary expense.
4. Developing an advertising budget and knowing just what resources
to use is key to keeping money under control in a small business. You
must advertise, but you also must get value for your money or you will
soon be out of business. Keep a record of how much is spent, can you
get payment terms, when is the most efficient time to advertise your
particular product or service to get the most value for the dollar.
Every dollar must be accounted for in advertising because the lifeline
of your business depends on new and paying customers. Advertising is
the way to get the word out to the community or the Internet.
5. A small business owner will sometimes be under self-induced
stress to manage all aspects of the business. Sometimes, leaving the
control and decisions to others that are qualified is the best way to
manage the business. Releasing control may be hard to do sometimes, but
in a lot of businesses, money can be wasted because the owner cannot
possibly be as efficient as the person who has studied or is
knowledgeable about a particular field. For instance, if a business
owner does not know accounting, many mistakes in reporting income and
taxes can be made. A qualified accountant can possibly save more than
the cost of their services in reduced taxes.
Take a hard look around your business and do not let anything be
set in stone if saving money is the goal. Challenge everything that
will cost money and see what can be done to change the situation. Any
money that is saved is money that can be put back into the business
either in profits or in growth.
A business owner wants their business to be successful and will
work hard to sustain growth. A business owner wants a way to continue
making and growing money from a product or service that is interesting
to them. After growing a business and being smart with cash flow, many
business owners will sell their businesses only to start another
The reason is that business owners are independent types and
challenges are rewarding when met and faced. Saving money through every
day operations will help the business owner to meet their financial and