The only way for small businesses to stay afloat in the growing market is if they generate a profit. One of the biggest challenges that small business owners face is breaking even. But often times, companies see great progress in productivity but enjoy no profit.
Finding out where there is a cash leak and fixing the haemorrhage must be your primary duty to keep your business up and running. If you aren’t sure what the root of this issue is, here are some hidden ways in which your small business is losing money.
Bookkeeping is one of the most important procedures that any business can’t compromise on. Since small businesses function on a low budget, many try to wear more than one hat and take care of the accounting process all by themselves instead of hiring an accountant. They rely a lot on the resources available on the internet to streamline the process. But the accounting process is easier said than done.
Hiring a professional to handle the accounting process will save you a lot of money. A professional accountant will be aware of all the deductions you are eligible to claim while filing taxes, choose the right category your business belongs to and can also possibly bring in place a series of money-saving plans that you might not be aware of.
In a scenario where you buy some supplies for your business and forget to add it to your books, you are in for big trouble. Your accounts will show that you have more money than you actually do. Due to this, you will end up spending more leading to a negative cash flow. So even if your budget is tight, hiring a professional to handle bookkeeping will be a clever investment.
Using one bank account
A very important advice that is given to any business owner is that business and personal lives must remain separate. This applies more to the bank accounts that one holds. It is imperative to maintain two separate accounts even if you are the sole proprietor.
If you don’t maintain two different bank accounts, the money you have allocated for your business and the amount allocated for your personal expenses get mixed up. In case of a personal emergency, you will end up taking the money required at that moment. This way, your business will lose the money that was set aside. Likewise, your personal life will bear the brunt if your business expenses are covered by the funds set aside for personal purposes. So always remember to separate your business and personal finances.
Poor product pricing
The price of your product or service could be an important reason for your business losing money. This is because it is either cheaper or more expensive than the market price. You can fix it by two methods – a cost-based pricing or a value-based pricing. If you opt for the former, you understand all the costs involved and fix the rate having in mind the profit that needs to be made. If you fix a price according to the latter you determine the value of the product or service to the customer. The best option would be to conduct a market research and list your prices according to how your peers and competitors have handled it.
No online presence
Businesses big or small cannot survive without having an online presence. Be it an enquiry about a product, purchase or giving a review, everything is done online. There are many industries that are performing well on the digital platform. So if your business is not found online, it is possible that your customers will choose the ones that have an online presence instead.
Fewer people visit shops to buy products these days and not having a website to order products from will account for a huge loss. It is impossible to ignore social media, especially the promotion it gives. Additionally, when customers purchase your products online, they use social media payment methods to complete the transaction. You can not only share your new products and create a buzz about it but also post customer testimonials that will boost your business.
Small businesses find it hard to reap profit with such factors sneakily burning a hole in the funds. These losses might be insignificant singularly, but if ignored, it will be a big force to be reckoned with. So it is time to look at your business management through a magnifying lens and rule out every possible way your venture will lose money.