5 worst ways small businesses waste money

Hewlett-Packard was formed in a garage. The first Domino’s restaurant was acquired with a downpayment of just $75 and a $900 loan. Spanx was created from a $5,000 investment. These companies started from nothing and made sure every penny they spent counted. If you want to be like these companies, avoid these capital-draining mistakes. 

1. Bad accounting

Bad accounting can make a thriving business sink, not to mention a small one. Here are a few examples of poor practices: 

• Mixing your personal and business finances
• Missing tax deadlines
• Not saving receipts and notes
• Forgetting to reconcile your books with your financial statements
• Being unorganized with your financial data 
• Failing to track your and your employees’ time and labor
• Starting projects or new ventures without a clear budget in mind

The good news is that these common errors are easy to spot, avoid, and fix. 

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2. High turnover rate

While a certain amount of turnover will always exist, it can also waste money. The time, energy, and, of course, the capital you spend replacing top talent that has been lost can take a toll on your financials. The low productivity of new hires is also worth mentioning. 

What is YOY, and how does it affect your business?

Other than having a direct impact on company revenue and profitability, a high turnover rate also has a negative effect on the company culture. It will lead to low workplace morale, deteriorate product/service quality, and make the projects/tasks inconsistent. Down the line, these things will translate into financial problems as well. 

3. Marketing mishaps

Without the proper considerations, marketing can have disastrous outcomes, especially when a business enters new markets. Here are two infamous examples. 

In the 1970s, American Motors names their car “the Matador.” They intended for it to represent courage and strength. But the Spanish-speaking consumers did not appreciate the translation – “the killer.” The sales in certain regions were lackluster. 

HSBC Bank spent $10 million to change its tagline from “Assume Nothing” to “The World’s Private Bank.” The original tagline was interpreted as “do nothing,” which wasn’t what marketers intended.

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4. Unnecessary office space (and other assets)

Having unused office space wastes immense resources on heating, cooling, and electricity. So, companies that choose to shrink their real-estate footprint can expect to reap huge savings. If your office and assets are costing more than they bring in, you can also rent them out. 

When trying to get rid of unnecessary space, consider the following: 

• Proximity to clients, customers, and amenities
• Attitude of employees
• Commuting patterns

It’s also important to re-imagine and reassess the company’s need for physical space as part of its ESG strategy.

5. Weak leadership

When a company’s bottom line is plunging, it’s also worth looking at anyone who holds a position of authority. Perhaps they’re failing to ensure the team is working together towards a collective goal. If there is no team chemistry or clear communication, it’s also on the leader. 

Whatever the reason for weak leadership, the results are almost always the same—poor employee performance and weaker sales. 

The faster you discover where your losses are coming from, the better. You might be wasting funds on things discussed in the article or something else entirely. In any case, make sure you have an inventory of the information that composes your entire financial situation and review your important financial data regularly.