TIGHTEN YOUR BELT

TIGHTEN YOUR BELT

By Bonita de Wet

Building the business of the future means ditching an “open chequebook” approach in favour of a money-saving approach to boost your business’s bottom line. Here are a few tips to help you make some significant savings and move your business forward.

All businesses are guilty of wasting money at times by either overpaying for goods or services, or not receiving value for expenditure incurred. And, many business owners aren’t even aware of where they are wasting their hard-earned cash. Problems arise when you incur costs without doing your homework by simply going along with “what everyone else does” in the industry. By the time you realise the error of your ways, after the costs have been incurred, it is usually too late.

WHERE ARE THE MONEY TRAPS?

Top money wasters include over-staffing, ineffective systems to monitor performance, unnecessary advertising and marketing materials, and unnecessary investment in infrastructure such as office space and equipment. Start-ups are the main culprits as they tend to waste money in their attempt to pull in as much business as possible, as quickly as possible, in an attempt to scale fast. They are inclined to spend money on items that could easily be left off the expense ledger. For established companies, the threat comes from being overly complacent and operating under the misguided notion that they can “afford to waste more than start-ups”. While no-one goes into business with the aim of making a loss, it happens all too often. Of course, not all losses signal the end, but consistent losses have serious consequences. In the short-term, this could mean less profit, an inability to pay creditors and employees, and a subsequent decline in overall morale. When a business fails to make profits, the long-term results could be staff retrenchments or, even worse, declaring insolvency.

There is no one-size-fits formula to determine where money is being wasted as each business is unique. But, keep in mind that you need to make sure you are receiving value when you spend. Before spending, evaluate whether or not the services or goods are needed at a particular time in your business’s life cycle. An internal audit can go a long way to helping you pin down where wastage is occurring, these are more operationally and efficiency focussed than external audits, which are more focussed on validating the figures than the value received.

So, where should you be looking to curb wastage? The answer is that the opportunities are endless, and you need to do your homework to ensure that when you spend money, the benefits you receive far outweigh the costs.