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One big problem we see when we go into assess a business is they're spending too much money and their financial scene isn't in great shape. This can hold the business back from reaching its full potential.
Small business owners totally get how important it is to handle money wisely in their business. They know they need to manage money better to up their financial game, but often are overwhelmed due to wearing too many hats and end up not making the changes they know they should. The result is, no profit, slower business growth, lack of funds for reserve and investment in addition to distributions to the owner for working as hard as they do.
The result is, no profit, slower business growth, lack of funds for reserve and investment in addition to distributions to the owner for working as hard as they do.
Let's first talk about what specifically gets out-of-control spending in financial related areas and how it does:
What Gets Out-of-Control
💰 hiring people and paying them too much right off the bat
💰 hiring too many people because the business itself is inefficient
💰 bad bookkeeping and inaccurate reporting to seize deductions
💰 not reviewing financial reports to create business strategies
💰 not reviewing your specific service or product profit for each one
💰 not having a purchase order system in place for staff
💰 paying bills twice because the finances aren't being monitored well
💰 pays more in taxes due to the lack of skill in bookkeeping
Example 1: We've seen it often whether in a doctor's office or a construction firm. Owners find themselves in urgent need of assistance and hire staff who claim to be amazing but have yet to demonstrate their capabilities. Due to the disorganization within the business, owners tend to hire an excessive number of employees, mistakenly perceiving a high workload but it's due to the inefficiencies of the business structure and staff. This leads to a chaotic environment where employees are overwhelmed and work remains unfinished.
Example 2: The owner or their spouse may handle the bookkeeping despite lacking the necessary experience or knowledge in this area. Neglecting to review executive reports from a strategic perspective hinders the development of effective business strategies, as managing a business involves more than just overseeing production. Allowing staff to place orders at any time further contributes to the financial challenges faced by the business.
Due to the disorganization within the business, owners tend to hire an excessive number of employees, mistakenly perceiving a high workload but it's due to the inefficiencies of the business structure and staff.
This is an all too common scene in most small businesses. Part of the reason we see this is because the business owners never had business training. I'm not talking about going to college necessarily but I am talking about getting education and self-improvement courses or seminars. It is also due to wearing too many hats and not having the skill of organizing under one's belt.
Now, let's talk about how to reign in the out-of-control spending! Of course, you probably are aware that this will not be an overnight solution. These are steps you can take and work towards.
How to Reign in the Control
💪 Get your business organized fully to ensure you don't need more staff just more efficiency and organization
💪 Hire people at a competitive base rate and then reward with bonuses
💪 Work with a professional bookkeeper who not only does basic bookkeeping but also helps you analyze your numbers and create business strategies (ahem, we know someone 😉)
💪 Implement a financial system that not only tracks your budget but also your profit for each job or each product so you know if you are charging enough or need to make changes.
Let us know if these tips helped or if you have any to add. If you would like a Free Consult, SCHEDULE HERE!
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