It probably goes without saying that the biggest reason your business could be losing money is because customers are not paying you on time. You do the work, or supply the product, and then if you don’t get paid, you start losing cash immediately. Collection agencies that work with small business, such as our company hear this type of thing all the time. It’s the single largest source of revenue loss.
But there are many other causes of lost revenue and some of them might not even be obvious to you and your team. Maybe they are and you’re just ignoring them. Whatever the case may be, there are a number of ways your business can be losing cash and if you’re not careful, it can only escalate if you’re not paying attention.
Poor Customer Service:
Customer service starts the minute the phone rings. Or in this day, the minute someone sends you a message on Facebook asking for a quote. Customer service or now referred to as the customer experience has never been more critical to building and saving revenue. And of course, your reputation. We are now living in an age where there are multiple avenues for a customer or potential customer to reach out to your business. And equal amounts of ways to harm your reputation.
You must emphasize to everyone in your organization that the customer experience on every level must be a great experience. From the tone you take on that social media message or phone call to the quality of your work and how your respond to complaints. Every detail counts. The damage the public can do to a business in this social environment is immeasurable and you need to be conscious of that.
Poor customer service and customer experiences will equal lost revenue.
Poorly Trained Staff:
There are a number of ways an untrained employee can cost you money. The first is that when they don’t know their job, they need to ask someone else either how to do something, or they need to ask them to do it for them. Now you have two staff members doing the job of one. The other is when you have untrained employees and they cannot make a decision and because of that, it can cost a business money. They either do the wrong thing or they do nothing at all.
Mistakes also lead to lost revenue. You could be the restaurant that doesn’t train their cooks the right way and you have to throw out food, or you could be the swimming pool contractor that didn’t train staff and it could cost you thousands of dollars. Taking the time to train everyone on your team will save you money.
There is probably an entire book that could be written (and has been…) on how bad accounting can ruin a business. But we’ll just summarize a few important items here.
First, not having a formal accounting system can be a disaster for your business. This is probably more of an issue for a very small business but sometimes, we get surprised ourselves. If you are going to run and grow a business, you need to have a formal accounting system in place. It doesn’t have to be complicated and you can hire a bookkeeper to help you set up systems. If you are running a growing business, you can’t grow your business and take care of the books. You need to have accounting systems in place and hire someone to take care of this. Maybe it’s a part-time bookkeeper.
You also need to make absolutely sure you are billing on time for what you provide. There are no exceptions. Getting behind in your invoicing is a disaster waiting to happen. Depending on your business, select and interval that you can work with to invoice. Put it in your calendar and do not postpone for anything. Getting paid on time is one of the backbones of having positive cash flow. Getting too far behind and not dealing with it can be very damaging to your organization.
You also need to keep an eye on what you are paying out in expenses. Often times we hear that a business has been incurring too much in expenses and the owners of the business were not aware. They were out trying to grow the business and didn’t pay attention to the cash going out the door.
Yes, you need to grow your business, but you also need to pay attention to your cash flow. Accountants, bookkeepers and reputable collection agencies should all be part of your accounting team.
Health and Wellness:
You need to take care of yourself and you need to take care of your employees. The bottom line is that when you and your team are not healthy, that can cost your money. When there is too much stress in a workplace, that will also cost your business money.
Make sure you are not working your team into the ground and give them the time they need to be as productive as they can for you. Create programs that allow them to take their mind off of work and even give back to the community.
If you think you can afford it, offer additional paid time off, gym memberships and other perks such as tickets to sporting events and time to go to industry conferences. Keep your team healthy, give them less stress and allow them to grow personally. You’ll see the results in your bottom line.
What other ways do you feel a business an lose money? Let us know in the comments!