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How a few common financial mistakes are costing small businesses

by Staff Writer
09 Dec 2019 at 13:00hrs | Views
Stats and experts reveal that a few common mistakes in financial management are often proving to be heavy for small businesses all around. Some of the issues are often a result of unawareness, while others are mistakes of inexperience. The common aspect shared by them all, however, is that whether collectively or individually, they are costing the smaller establishments quite dearly. Here are some of the that mistakes businesses make.

Not Comparing the Price of Business Energy
Business gas prices are increasing every year, alongside commercial electricity prices. Although there have been attempts at curbing those costs, the prices still are quite steep. As a result, whether it's a restaurant or a manufacturing facility, spending a good chunk of money every month on paying business utility bills is not optional.

What a lot of small businesses from several sectors don't know about, however, is that in spite of all the price hikes, it is still possible to compare the quotes for business gas prices on comparison sites like Utility Bidder. As this unbiased platform negotiates by utilising the existing competition between the various leading commercial energy suppliers, the smaller businesses benefit by getting the best quotes from them.
Unawareness is the primary issue here, and it is a financial mistake to not compare and negotiate business energy rates before signing a contract with any supplier. The money saved per month can make a huge difference, which becomes more significant with each passing month. On the flipside, the extra money paid by SMEs on business gas prices and electricity bills puts them at a significant disadvantage, as they try and compete with others in the market who have not made that mistake.

Paying Rent for an Unnecessarily Big Office
It isn't uncommon to see new businesses pay rent for office space that they don't really need. Real estate is always big money, and even a small increase in commercial space can be a huge expense to bear. An office space that's more in sync with the needs of the company is the best way to cut office rent - one of the biggest, if not the biggest expense for smaller establishments from all sectors.

On the other hand, those that have been in the business for long enough are trying to not just reduce their office size, but they are also looking to eliminate some of it altogether.

Virtual offices, cloud synced, connected platforms, video con-calls, etc. are being adopted by even the biggest names in various industries to decrease rent expenses wherever possible. If the technology and the scopes of the businesses match, it is imperative to take advantage of that and cut down on renting expenses as much as possible.

As should be obvious, the impacts of unnecessary rent expenses are felt worse in the long run by smaller companies with limited resources. It remains just as true for offices as it is for industrial ventures such as warehouses, manufacturing and processing plants, etc.

Overstaffing - a Bad Decision for Both Employees and Employers
Overstaffing can mean different numbers, depending on the size of the concerned business, but it is important to get that number right for adequate financial usage.

Experts agree that it is better to hire temps for handling excess workload during rush seasons, rather than putting more staff on the payroll.

Unfortunately, overstaffing is observed to be quite a common mistake made by inexperienced businesses, especially in the retail sector.

The result of such mistakes negatively affects both the employer and the employee in the following ways:
  • All employees are paid lower due to overstaffing, as the cash flow is stretched thin
  • Due to the extra strain on the financial resources, the business might have to downsize anyway
  • If the business shuts down due to overstaffing, all employees lose their jobs
  • The promise of bonus pay during rush seasons decreases with an unsustainable increase in employee numbers

Increasing the size of a company's workforce is crucial to its growth and to boost its productivity. However, unless that growth in employee strength is a planned and sustainable move, the decision will fold on itself, affecting management and workers alike.

Revealing the reasons in detailed discussions is a good method to spread awareness and straighten some of the learning curves for inexperienced entrepreneurs. In a few years' time, we will get to see how effective that turns out to be, as more media outlets adopt similar methods to help small organisations improve their cost-efficiency and overall financial management.

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Source - Byo24News