Is Your Small Business Ship Sinking? Find Out And Stop It!
Sustaining a flourishing bottom line is what every small business strives for. You know that if you want your business’s doors to stay open for a long time, you’ll have to wet your hand in everything. While running a small business, you’ll have to wear numerous hats. You’ll have to work smarter and keep a close eye on every department of your business so you can save every last penny where ever possible. However, maintaining such a profit line is somewhat challenging, especially if you have fewer resources to work with.
There might be a lot of things eating away your profits without you even having a clue. It might start slowly, but it will quickly turn into a tsunami of problems in the long run. Finding your financial woes’ root cause will help you reduce your losses and turn everything around. So, why isn’t your small business profitable? Here we would like to share a few critical reasons why it is so and what steps you can take to avoid it.
Poor accounting practices
If you use a cluttered and disorganized accounting system, you will have no idea what your actual financial numbers are. Instead, you’ll be left guessing and wondering with no idea of how much money your business is making or losing. Keeping that in mind, it won’t be easy to keep track of your money situation when you overlook certain transactions completely.
Think of it like this; suppose you procure supplies for your business but forget to enter the purchase details immediately. In that case, your books will show that you have more money than available. As a result, you will surely end up spending extra money, causing a negative cash flow. To avoid this, you must record every transaction, no matter how small or big, as accurately as possible. You can also hire a professional accountant to do your business bookkeeping or enroll in an AACSB online MBA no GMAT needed to play the part yourself. Since the online program has a lower barrier for entry, it’s a handy option to skill up and manage your business while keeping a close eye on your financials. Simply avoiding small numerical mess-ups could decide whether your business stays afloat or not.
Improper utilization of technology
Many small business owners try to get by with outdated technology that decreases productivity and slows down production. Or take the alternative route and invest in the newest tech with no actual use in their business. Proper utilization of tech in your small business will drastically increase profitability and productivity. However, you have to consider what you want to accomplish and what type of tech will yield the most profitable results.
Purchasing the latest and greatest tech that contains all the bells and whistles might not deliver any benefits to your business and result in your business leaking money in the long run. So, ensure that you know what to achieve, what type of tech will help you achieve it, and how to use it to your advantage.
Poorly trained employees
Not investing in proper employee training can have detrimental impacts on your small business. Half-trained employees tend to look for shortcuts to complete essential business tasks and don’t understand the implications their actions can have in the long run. While companies consider employee training as an added cost, it will deliver saving in the long term. In the end, poorly trained employees, without it being their fault, will end up creating constant cost blowouts and operational problems. Therefore, invest in providing your employees with the necessary training to reduce the risk of errors on the job and increase profitability.
Not marketing your business properly
Are you effectively marketing your business, services, or products? Do you have an idea of the ROI for every dollar you spend on your marketing efforts? We usually see most small businesses spend tons of cash on marketing without knowing what they want to achieve. Proper marketing practices will end up deciding whether you stay in business or close up shop prematurely. After all, through marketing, your company makes direct contact with potential customers.
If you adopt accurate marketing practices, you will have a barrage of customers that purchase your products or services first and process their usefulness later. To properly market your small business, you need to regularly analyze your marketing efforts, focus on your target market and customers, and build fruitful relationships. Once you do so, marketing your business will become a breeze, and your small business will flourish.
Missing or late payments
For every payment you delay or miss out on, its negative impact on your business grows with every day you wait. And the longer you wait to pay or receive money, the more you have to pay in late fees or the bigger your cash deficit. A plan of action is necessary to avoid these late fees and discrepancies in cash flow. A wise decision is to look at your business’s accounts payable and receivable. It will allow you to ensure you haven’t missed out on any payments.
Follow it by reviewing the way you collect payments from your customers whenever they make a purchase. Suppose you are not receiving on-time payments from your customers. In that case, you’ll probably have to pay your vendors from your pocket or your emergency funds, leaving your business in debt.
Business management is an ongoing process and requires tons of trial and analysis. It would be best if you constantly innovate to bring more customers to your business while also satisfying existing ones. That said, innovation should start from a review of your internal process to know where your business is leaking money. Once you know where you should innovate and implement changes, everything will become smooth sailing. Your business will become a powerhouse in your niche.