The habit of being accountable to every dollar spent in your business is cornerstone to fiscal responsibility and imperative to maximize profits. As your business increases revenue, your expenses and accounts payable are also likely to increase. Financials become more complex and keeping tabs on every dollar spent is critical. It’s common that businesses begin to “leak” money without even knowing it; overtime accumulating to what can be a substantial amount.
Here are ten areas of your business to be sure you’re auditing and not leaking money!
1. Merchant account fees
This one requires some work and research on your part. Be sure to compare services (generally avoid banks as they typically are more expensive); know if there are transaction fees, varying rates for different kinds of cards and be sure that you work with someone to setup your account properly. Periodically shop around and compare rates and it doesn’t hurt to ask for a lower rate once you’ve established yourself as a good customer.
2. Liability insurance
This is an area of business that can change as your business evolves. As you hire staff, increase revenues, have a physical facility or offer services in multiple locations, your liability requirements change. There are several companies now offering online quotes and processing. But do your due diligence; get quotes (from representatives you speak with!) from multiple companies to compare services and costs and be sure you’re adequately covered and not paying for coverage or services you don’t need.
Consistently evaluate how you pay each of your staff. Per session? Hourly? Flat rate? Salary? Sketch out several different pay scenarios in a spreadsheet to be sure you’re optimizing the staff you have for your revenue and what you’re paying out (see #6).
4. Subscriptions and memberships
More services are process through automated recurring fees or requiring membership of some sort. Take careful consideration of long-term contracts and commitments, especially if there is a penalty for cancelling. Frequently audit the value of the service you’re receiving and look at different plans they may offer that fit your needs best so you’re not overpaying and underusing the services; or just not using them at all.
5. Professional services
Watching what you spend on professional service partners like your accountant, bookkeeper, attorney, web designer, etc. is a bit more arbitrary than most other expenses on your books. It certainly is worth your while to periodically compare rates and services with other service providers. For these services, “you get what you pay for” most often rings true; but you still want to be sure you’re not overpaying for the value you’re receiving.
6. Not charging enough and giving it away for free
Have you recently done an analysis of your fees? Try running the 30/30/30 guideline against each of your services: 30% should cover payroll, 30% should cover overhead costs and 30% is profit (10% left for room in each category). If you’re falling short in any of these categories, you may be paying out too much in expenses and/or payroll or need to adjust your pricing. Giving away water or other perks to loyal clients? Great! Just make sure your fees cover your costs!
Where in your business are there inefficiencies? Do you have two staff members doing what one person could? Are you losing employees and constantly must rehire? Does it cost too much in time and money to attain and retain clients? Make sure you have systems in place to keep every part of your business as efficient as possible.
8. Interest and fees
If you’ve taken any type of debt out on your business with credit cards or loans, be sure that you’re keeping a keen eye on your interest payments and any other fees. Seek out guidance from a financial adviser who may be able to help you manage your debt so you are paying less in fees and interest and come up with a payoff plan.
9. Dining out, coffee, travel expenses…
Allocate a budget for dining out, coffee and travel expenses; it adds up quickly and doesn’t always directly impact your bottom line!
10. Networking events, advertising and marketing
If you attend networking events, evaluate each to be sure they are worth your time and money. Come up with concrete objectives for each event, like how many connections you will make or to meet with specific people that will yield some sort of reward for your business. For advertising and marketing campaigns, keep a spreadsheet that tracks your results (or lack of!); some client management systems will do this as well. Every networking and marketing effort should have clear intentions and give you results, otherwise, it’s money seeping out of your business.
Keep accountable to a calendar to review your monthly budgets and statements and scrutinize every dollar spent. There is no better feeling than having complete control over your business, your books and your future growth.