March 11, 2016

5 Hidden Ways Your Small Business Is Losing Money


Keeping track of cash flow issues and saving money whenever and wherever possible should be priorities for any budding small business. Making sure that your finances are in order and your spending is as efficient as possible could be said to even be absolutely vital to the survival of a new business trying to get off the ground on a shoestring budget.

But keeping your books perfect is easier said than done. Running a small business is hectic. As a small business owner, you are forced to wear several different hats day in and day out. In such a situation, it’s not uncommon for small business owners to completely overlook a variety of holes in the process that could be causing your business to leak a lot of money.

The biggest problem is that many of these lost funds seem to be rather insignificant in the grand scheme of things, but in reality, they are anything but. If you’re leaking money constantly and not doing anything to rectify these situations, it’s going to add up. And this is something that could spell big trouble for small businesses if the problems persist and remain unchecked.

Here are a few of the most likely ways that your business could be losing money month over month.

Lack of Organization

Not being organized as a business will not only decrease your productivity, it will also cause you to leak money at an alarming rate. A survey conducted by Brother International in 2010 concluded that a week’s worth of hours is lost every year by employees trying to locate things they have misplaced either in their physical offices or cloud storage and email. According to the study, almost $177 million in lost productivity annually because of disorganization.

Keeping yourself organized can pay off big time. If you’re having a slow day at work, take that time to organize yourself. Look through your work folders, make sure that everything is being stored logically so that you’ll know where to look when you need something. Be meticulous about your paperwork and supplies and how you are organizing them.

Take the time to organize your work habits as well. It pays off to spend the first hour of your work day going through a checklist of your work priorities and what it is that you need to accomplish on a daily, weekly and even monthly basis.

Employee Turnover

You’ve probably heard it a million times, but if you’re still not convinced that losing employees and having to hire new ones to replace them can cost you serious amounts of money, here are some statistics to take a gander at.

According to a study by the Center for American Progress, depending on the education and qualifications of your workers, you can stand to lose anywhere in between 16% and more than 200% of a worker’s annual salary.

Other studies show that the average price of employee turnover is about six to nine monthly salaries of the worker you are replacing. So if you are losing a manager who made $50,000 a year, it will probably take you $25,000 – $37,500 to replace that employee. This is when you take into consideration everything: the cost of finding the candidate, recruiting him or her and onboarding/training.

Obviously, you need to think about implementing methods for decreasing employee turnover if you want to stop losing all that money to the process.

It’s also important to remember that keeping substandard employees who waste time and make your team generally less productive is a habit that is just as wasteful financially as constantly firing and hiring new employees as replacements.

Service Fees Going Unnoticed

In this age of technology, there are so many tools out there that can help you run your business. At the same time, many of them are incredibly affordable, or at least appear to be when you are only looking at their monthly costs. As a business owner, it’s sometimes hard to resist buying a new tool or paying for a new service.

Trying out and using these services is fine, but you need to be keeping tabs on them regularly and analyzing whether or not you are using them enough to justify the cost. It’s very easy to simply forget about the charges coming in every month.

Take one day every few months to take a look at all of the charges coming in to your company credit cards and assess whether or not you need to continue paying for these services. Are you using them regularly? What’s the ROI? Is it worth it? If not, cancel the subscription. Even if you do end up needing any of them again, re-introducing them certainly won’t be a problem.

Poor Accounting

When working with a tight budget, small business owners are often inclined to try and do all of the accounting themselves. Sure, there’s lots of information available to you online and plenty of accounting resources and checklists you can use to streamline the process.

But at the same time, it’s hard to deny that keeping all your books in order is a complex process. That’s why hiring a professional to help you is one of the best investments that you can make. Having a tax professional do your accounting can save you thousands of dollars each year.

A professional will know all of the deductions you can get back when filing taxes, the proper designation to choose for your business type and can potentially implement dozens of other money-saving processes that you might not be all too familiar with. Even on the tightest of budgets, it’s a good investment to get professional accounting help.

cash flow problems

Poor Employee Scheduling

Here’s something we can help you with! Remember when we talked about cutting down on paying for services that might not be absolutely vital to your business? Well, making sure that you are paying for services that you use every day and can truly help you run a tighter ship is equally important.

Having a great employee scheduling solution like Humanity on your side is one business expense that’s worth signing up for. If you are constantly understaffed or overstaffed, if your employees are coming in late or abusing your lack of time and attendance monitoring, you’re losing lots of money on a weekly basis.

Scheduling your employees more effectively allows you to take better control of your labor costs and stop losing money to poor employee management.


If you are dedicated to plugging these holes in your business that are causing cash flow issues, you need to get serious about it. Approach the problem analytically. Keep better records of your expenses, analyze them to see whether the return on investment makes senses, and make cuts when the ROI just doesn’t add up.

This is especially important for newly-opened small businesses, where every penny counts and a lack of financial diligence can literally sink your company before it even has a chance to succeed.