5 Places You Are Wasting Money In Your Business
There are lots of ways businesses waste money. At BDG we have worked with a number of different businesses in varying industries, so we have seen it all! Usually, we start a business with the goal of making money or earning income, but with so many different responsibilities to juggle when running a business, some money can fall through the cracks.
So what money-wasters have we seen most often?
We’ve compiled a list of the 5 most common areas where businesses are wasting money:
1. Services or Apps You Aren’t Using
We have all signed up for a service (or maybe a gym membership? Hello New Years Resolutions) or paid for an app that we don’t actually end up using. Businesses are no different. Certain services or apps seem like they are going to be great for your business, but they don’t end up being as functional as you thought. So you don’t use the app right away and then, with the hustle and bustle of running a business, you forget you even paid for or have that particular service or app at your disposal.
As an example, we have seen businesses paying monthly for consulting services, without any details as to what services are being provided, and in some rare cases, receiving no services at all. We recommend making sure you are provided with a breakdown of the services you are paying for, that way you can follow up accordingly.
Specifically looking at e-commerce businesses, they may be paying subscriptions for integrations that aren’t working as efficiently as they can or should. Some don’t capture all of the sales tax properly, whereas some can save you time and money overall, if it’s a better integration based on your company’s processes.
Make sure you know what you are paying for and that you are getting exactly what you need for your business. Cut the excess or get rid of the apps that aren’t working effectively for your business.
2. In-House Bookkeeping
We see this a lot. Businesses either want to do their own books or aren’t quite ready to pass that responsibility on to an accounting firm. Doing your own bookkeeping can seem like a good idea, but it can end up being more costly than hiring a bookkeeper or engaging an accounting firm.
We have worked with a number of business owners who have done their own bookkeeping and we even wrote a blog post on bookkeeping tips based on the most common issues we see. Many accounting firms (like us) currently offer fixed-fee pricing, which can include bookkeeping, corporate tax returns, sales tax returns, and advisory services. When you compare fixed-fee pricing to paying hourly for corrections to your bookkeeping, you may end up spending a lot more than you need to.
If you hire your own bookkeeper, you will be paying them directly, and then may be paying your accountant for follow up, adjustments, and other communication or information they require from your bookkeeper. So keep that in mind when you are deciding what is best for your business.
3. CRA Fees
One of the most common and most unnecessary money-wasters is paying fees to the CRA. Many businesses fall behind on their corporate and sales taxes, and/or file late for a number of reasons, but with the technology available today, that is completely unnecessary. Using programs like Receipt Bank and Xero, and having your bookkeeping done on a weekly or monthly basis, make it much easier to avoid paying these fees.
So if you have the tools at your disposal, you need to use them!
When thinking specifically about penalties for late filings, we strongly believe that can easily be avoided because sometimes it’s just a matter of getting your accountant the information they need in a timely manner. The later you file, the more you pay. Penalties and interest can add up quickly!
Some business owners decide to file without having all of the right documentation for expenses or by guessing on some of the numbers in order to avoid paying penalties and interest. However, if the CRA decides to audit your business, they can go back and deny expenses you have claimed (if you lack the right documentation for example). This is costly, as they will adjust the amount you owe and add interest from the payment deadline. And on top of that, you may have to pay more accounting fees for the audit support required.
At the end of the day, make sure you are providing all of the information required to your accountant and that you are being timely with that information so that everything is filed on time and accurately.
We’re not saying don’t spend money on advertising, but you do need the right advertising for your niche. We’ve seen businesses spend tens of thousands of dollars on marketing and gained no leads or business from all of the money spent. In fact, we have been down that road ourselves. If you are hiring an advertising or marketing company, make sure you know if they are reputable and whether they can actually deliver results for your niche.
A number of years ago, we worked with a marketing agency and were really impressed by their promises and their confidence in being able to market our services. We had to commit to paying a certain amount over a 6 month period, regardless of results, and unfortunately we didn’t actually gain leads or business. It’s very possible that we could have seen results had we extended the campaign for an additional 3 to 6 months, however financially, it didn’t seem like the best investment for us.
If you are running your own ads, make sure you are tracking what you are spending and what you are getting out of each ad placement (whether that’s leads or sales). If you don’t have a background in marketing or advertising, you may want to do some research or maybe even take a course on Udemy or another online learning platform to find out what might work well for your business.
5. Poor Culture & Morale (Recruiting/Turnover/Training)
It’s no secret that a poor company culture or low employee morale can be bad for business. It can really have a snowball effect on your business.
Employee turnover is a common outcome, which can lead to the business being understaffed (potentially for a long time), unhappy customers or clients, and can also lead to spending a lot of time and money on recruitment and training. And the really unfortunate thing here is that even after spending so much time and money on recruitment and training, the actual problem with the company culture or morale remains unchanged. Meaning that you might be hiring again very soon.
If your company is experiencing a high attrition rate, do you know why that is? If not, it might be worth doing exit interviews to find out where the problem is. Maybe it’s one specific department or a particular manager causing the problem, or maybe it’s a company-wide problem that will be much more difficult to solve.
If you are large enough to have an HR department, they may be able to conduct exit interviews with outgoing employees or create a company-wide survey to gauge employee engagement and morale.
If you don’t have an HR department and want to invest in solving this issue, there are companies that you can engage to do exit interviews for you. Mintz Global Screening is an example of this.
Are these the only ways businesses waste money?
Of course not! There are other areas where businesses could be wasting money, but these are the most common we have seen throughout the years. We hope we have helped you think about some areas where you may be losing money unnecessarily, so that you can have a successful 2021!
Special thank you to Rotessa for collaborating with us on this blog post!