It is possible to spend money without knowing how and why. The devil is in the details.
For startups, every dollar is precious and critical in sustaining the business financially given that most startups bootstrap and have limited funding.
According to a survey by the Association of Certified Chartered Accountants (ACCA) Singapore, cash flow issues worsen as a result of the COVID-19 pandemic. It is reported that 37 percent out of an expert panel of 115 finance professionals said their firms are having cash flow problems.
Businesses cannot rely on government relief in the long run and would have to sort out the fine details before they pile up into a giant unavoidable mess.
So how might your business be bleeding cash? It’s time to plug the gaps and stop your cash from leaking through loopholes!
Here are 9 ways on how you might be wasting your business cash
1. Not tracking your business expenses
The devil is in untracked expenses. Untracked expenses, also known as invisible spend, is quite straightforward in which it refers to any business spending that is not accounted for or documented within the company’s existing systems. This can include travel expenses, meeting expenses and more.
If kept unchecked, the current business expense management system can be abused by employees and incur a lot of financial and operating costs to the company
2. Not managing your company travel program
For companies that require employees to travel often, having travel and expense policies are a must. But as policies are wordy and difficult to remember, employees may book travel arrangements that do not comply with the company’s policies.
As a result, companies may have to incur additional spending as employees are not able to make full use of the cost-savings that the company has negotiated with their travel partners. Even if the amount can be small per transaction, multiple transactions eventually accumulate the spending and reflect a much larger monetary cost for the company.
Furthermore, we have to also consider the non-financial aspects of this scenario. The amount of time taken to plan, book and arrange the travel service may be quite substantial and create inefficiencies within the company.
There are travel and expense management solutions available in the market that can automate the process and manage your company travel program for you. Software solutions like Navisteps can even integrate both the travel and the expense management aspect together in one platform for ease of use.
3. Trying to do everything yourself
Don’t have a finance-capable staff but still doing finance and accounting work on your own? Making your staff do random mundane admin work apart from their own roles?
Trying to perform all of your business tasks without the necessary basic knowledge and expertise can actually create additional costs! Not only does it take up extra time from your employees, you are actually paying them to be less inefficient and be less productive!
For example, a content writer may be able to churn about 2-3 articles a day but because of the additional tasks allocated to him, he would only be able to do so in 2 days instead.
Outsourcing business activities may be a solution to make the most out of every dollar you spend and increase business productivity! Automated solutions are also an alternative for businesses to consider as well. Imagine automating your entire pre accounting and pre compliance process. You can then focus and more mindshare on other business growth and revenue-generating activities.
4. Outsourcing every little thing
There are some businesses that simply outsource too much. This can result in business disaggregation and the lack of understanding and awareness of important business elements.
Striking a balance between having an internal team and outsourcing the work is tricky. How much work should be outsourced and will having internal staff be necessary? Juggling the costs between the two is difficult but it is necessary to analyse the structure and allocate the resources accordingly. Don’t be lazy and start analysing!
5. Not doing research and comparisons
Google is everyone’s best friend. Don’t know how to start hiring? Google it. Don’t know how to manage your expenses? Google it. Side note: let us know if that is how you ended up here!
Doing research can help you to understand how you can optimise your business processes, which actually saves you a lot of money! If you are looking at productivity tools, platforms such as Notion and Asana will be very helpful - especially since most of us work from home nowadays. Other useful business tools such as expense management, business insurance, HR, accounting and etc are also available in the market so you can just to do some “shopping” to see which solution is the most affordable and suited for your business needs!
6. Belittling smaller transaction amounts
Be it a $100 or $10 receipt, all expenses should be accounted for and should not be ignored. Many businesses tend to neglect small transactions as they do not think that it takes up much of the company’s financial resources. But just imagine if one person wastes an extra $10 a day and that you are in a small 10-man startup team, this would mean your company is spending an extra $100 a day. Assuming that there are 262 working days in a year, this would accumulate to an estimated total of $26,200! This amount of money can typically last a startup for 2-3 months (or even longer if they are prudent and small).
These little transactions are also helpful for you to request for tax deductions as they may include tax-deductible expenses as well!
7. Not using government grants
In Singapore, the government is actively promoting startup and innovation within the ecosystem, and has recently announced in August last year that they are pushing more money into startup funds. As part of the enhanced measures to boost startups, first-time entrepreneurs will be able to access a higher start-up capital grant of $50,000, up from $30,000, to help them launch their business ideas and create new jobs amid the ongoing coronavirus pandemic.
There are also other schemes such as the Productivity and Innovation Credit Scheme (PIC) by the Inland Revenue Authority of Singapore and programmes such as the Startup SG Founder programme, which is overseen by Enterprise Singapore (ESG).
These initiatives are beneficial for businesses to save on costs and maintain good financial health as they focus on scaling and development of their business.
8. Not seeking advice
A critical mistake that most business owners and entrepreneurs do is to not seek advice. Do not be shy or afraid to ask. It’s okay to let others be aware of what you don’t know.
You don’t have to pay thousands of dollars to seek an “expert” or “consultant” to review and analyse your business. By reaching out to friends, family, partners, and other connections, you can find the most interesting and unique views and advice that you may never ever think of! The ones closest to you can actually provide you with the most down-to-earth and sincere feedback that can benefit your company.
9. Having too much office space
As we are all familiar with the work-from-home working conditions that have emerged as a result of the COVID-19 pandemic, companies now face the issue of having too much office space and rising occupancy costs.
Physical offices that cater to the entire headcount are no longer necessary and companies can now make use of co-working spaces and digital collaboration tools to continue working as per normal at a fraction of the original expense cost!
What are other ways businesses waste money that we have not included in the list? Feel free to let us know and we will update the article accordingly! Let’s all help each other save money and stay resistant against potential crises in the future!