Why is the color of money red? Red is a warning sign, red is a mark of danger, and that’s exactly what money can mean for your business. You might have heard the phrase more money, more problems. Well, the meaning of those words certainly rings true in the business world. In this case, it’s about expanding too quickly before you have full control of the company costs. If this happens, you will essentially be growing past your means. You could end up in debt if your costs balloon before you can get a grip on them. This is just one of the issues you need to contend with if you’re thinking about money. There are many more, and they are all related to your costs. On this post, we’re going to look at a few of the worst issues and how you can deal with them effectively.
Costs Growing Out Of Control
We’ve already mentioned the first issue, and that’s the problem with costs growing to levels higher than you can handle. Believe it or not, though, this isn’t usually about overspending. Instead, it’s all to do with poor management. Business owners don’t keep a tight enough budget, and that means that things do start to go wrong. For instance, you might start to spend more money than you need to in marketing or IT support. These days, it’s possible to outsource both areas of the company, cutting costs right down. But, if you don’t do that, you should at least be researching and finding the best services possible for these jobs. Or, getting employees on your team who aren’t going to charge an arm and a leg.
At it’s most basic level, this means that you should be using someone or something to manage your costs. It is possible to use software for managing expenses. This will help you keep track and ensure you know exactly how high the costs are. You will be able to keep track and lower the spending where it might be necessary. This is the DIY approach. You may also want to think about hiring a team to sort it out for you. There are skilled accountants available online that used cloud based tech to managed your accounts out of the house. This means that the management of your spending isn’t another charge for your business. But you can still keep things under control, and that’s exactly what you want.
Obviously, as well as cost management you want to think about how to cut your spending in certain areas. These days, the best way to reduce business spending is to go green. The way to approach costs is to think about what is costing you more money without any benefit at all. Energy certainly fits into that category. It’s possible that you are spending thousands on your energy bill when your business competition is spending merely hundreds. To cut energy, we suggest you look at renewable alternatives. For instance, you can get solar panels installed on the roof of your company building. With tech like this, you can make sure that bills are kept to a minimum. While the initial spend might be expensive, eventually you will see fantastic levels of ROI.
You might find that the problems with money are to do with costs in your company that you couldn’t predict, but you can prepare for. You don’t need to know that there’s going to be a nasty expense down the line. You just need to be ready to pay for it if it does arrive. And, you will be as long as, you guessed it, keep costs under control. But what types of unforeseen expenses are we talking about here? Well, for one you could be hit by a legal claim.
Legal claims are remarkably common in the modern business environment. In the past business owners have been inundated with PI claims. PI simply means a personal injury, and this is usually related to something that has happened to an employee while they have been on the job. To protect against these types of claims, it’s worth looking into insurance schemes. With the right insurance, you can make sure that if you are hit by a claim, you’re not the one facing the bill.
Although arguably, the best way to avoid the expense is to make sure that you don’t face a legal issue like this. To do that, you can invest in the services of a legal advisor. It’s possible that the reason for a lawsuit wasn’t because of negligence. Instead, it was because an employee did not keep up with the latest changes in the law. The law changes regularly with new regulations put in place that could affect you as a business owner. So, you do need to be careful.
Another expense that you may not have predicted would be a maintenance issue with your office. If there’s a heavy storm, you may find that the roof of your company building is damaged. Or perhaps there is flooding. Don’t forget it is your duty to keep your office as a place to work. That includes keeping the building maintained and you want to fix these issues as quickly as possible. Otherwise, the cost will grow, and that’s a guarantee. Think about how easily the price of a repair in your home can balloon if it is left to fester. The same is true for a business building.
Due to issues like this, you should always make sure there is some extra money in your account. Think of it as a rainy day fund that you can use in the case of the emergency. At certain points, you may have to borrow and face debt as a business owner. But you want to avoid this for as long as possible because it’s a slippery slope. It might start with paying for one expense. But it could end with you having to fork out money in every aspect of your business model.
Clients And Customers Not Playing Fair
In some industries the biggest issues business owners face with money is their customers not playing by the rules. We’re talking about late invoices here. You charge a client for a service or a product that you provided, and they don’t have to pay up straight away, leaving you out of pocket. There are lots of reasons for this. If it’s a product, they may be planning to sell it on. If that’s the case, they won’t be willing to pay up until they’ve shifted it off their own shop floor. If it’s a service, they may be waiting to see how effective it’s been. You’ll often find this is the case after delivering an SEO service to a customer in the marketing industry. But there’s a problem here because if lots of clients do this, it could leave you barely breaking even. What are the solutions?
Well, you could politely request they pay on time. You might ask for payment in advance as well. But in the first scenario they could just ignore you, and in the second it makes your business look shady! Instead, we recommend an invoice factoring service. Another company will buy your invoices off you, and you can get the money you need. It will then be their responsibility to get the cash owed from your clients, often with interest. If you are using a service like this, you do need to think about the relationships with your clients. You don’t want to burn too many bridges.
In modern business, if there’s one idea or concept that you need to keep in mind, it’s flexibility. You need to make sure that your business has the option of changing the game. What this means is that if your costs are too high, you can adapt. You can outsource areas of your business to other companies, reduce services or change what you offer customers. These are all very real possibilities that you want to consider. But how do you make sure your business is in right position to make these changes?
Well, first you don’t want to be tied down to one particular area or location. These days it’s quite common for businesses to be set up at home. There are very few models that can’t at least partially be run from the comfort of one’s home. If you do that, you’ll be immediately limiting cost and ensuring your business is flexible.
You might also want to think about the workers who you hire in your team. It’s possible to avoid fixed contracts and instead focus on freelancers. With freelancers, you don’t need to worry about issues like tax, incentives or for that matter hiring and firing. With freelancers, short term is built into the concept. As such, you are always ready to make the necessary changes in your business to boost the company.
As you can see then, money can be dangerous in your business. And, having more doesn’t necessarily mean you’ll be in a better position on the market. Ultimately, it could just cause you to waste resources. So keep control of your spending, and you can make sure finances won’t create too many headaches.