No company deliberately sets out to waste money (and if they did, they wouldn’t be around long). Money usually gets frittered away without us realising, often as a result of pouring money into things that we believe are valuable, when actually they aren’t.
If you’ve been trying to cut costs in your business, consider whether you may be guilty of any of the following money-wasting mistakes…
Marketing without a strategy
Marketing is essential for attracting customers, but most companies don’t put much careful consideration into having a strategy. In fact, many people think that they can just invest in generic marketing methods and get results. This could include printing off a mass of flyers and posting them through random people’s doors or boosting random posts on social media and hoping for the best.
Without a strategy, your marketing is likely to be ineffective, resulting in a lot of money wasted. Take the time to first do research – this includes knowing your audience is, where best to find them, how to reach them and at what time to do it. You should also measure the results of each marketing campaign so that you can decide what works and what doesn’t work.
Investing in unnecessary technology
Having the right machinery and software is important for making your business more efficient and keeping up with competition. In some cases, technology can even save you money by saving you time. However, there are other times when it can be a huge waste of money.
This could include paying for advanced technology that’s unnecessarily complex for your needs such as an industrial printer that prints off 60 sheets of paper per minute when you rarely print of 60 sheets in a day.
Alternatively, it could involve splashing out on equipment or software that you only ever use once such as carpet cleaning machine to shift some stains in your office (hiring such a machine would be a much more sensible and economical option).
To avoid buying the wrong technology, always assess your needs first. Read reviews to get an idea of who the technology is aimed at and see if you can test it out before buying (you may be able to download free trials of software or test out machinery in a store). If you’re only going to use the technology once, consider hiring it or outsourcing it.
Of course, it’s also possible to waste money on technology that’s too rudimentary or poor quality. Make sure that you’re not skimping out too much so that you’re not affecting the quality of your work.
Not watching your energy consumption
A lot of companies don’t monitor their energy usage, resulting in high energy bills. Taking steps to lower your energy consumption could save you money, plus you can show off about running a green business (which is good for the planet and your reputation).
There are lots of ways to lower your energy usage. Firstly, you should consider the machinery that you’re using – certain machinery may have a poor energy rating compared to other machinery (in most cases, older machinery is less energy-efficient).
Changing incandescent light bulbs to LEDs could also result in savings in the long run – while more expensive to buy, LEDs last longer and use less energy to provide light. You should then consider when you’re using electricity and heating. Small steps such as turning off and unplugging machinery at night could save you money. You could also try opting for motion-sensing lighting so that lights aren’t being left on when no-one is around.
There could be even greater investments worth making to help you save energy. Extra insulation, for example, could help to trap heat in the colder months so that you’re not having to use as much heating. Installing solar panels meanwhile could allow you to generate your own supply of electricity rather than having to rely on the mains, saving you money in the long run.
Not monitoring employee use of resources
It’s possible that your employees could be using resources inappropriately, resulting in money wasted. This could include printing off excess documents that needn’t have been printed off, wasting paper and ink, or using a company vehicle for personal use, resulting in unnecessary fuel consumption.
There are many ways in which you can limit this. For instance, you may be able to put a quota on print-outs – if employees go over their printing quota for no justifiable reason, they have to pay for it. As for usage of business vehicles, you may want to consider using a telematics company to install cameras in vehicles so that you ensure employees are only using vehicles for business purposes. Such measures are likely to make your employees think more about their usage of resources. You may even be able to reward employees for keeping a low MPG.
Rushing or overcomplicating the hiring process
You can also waste money by taking too little or too much time to hire new employees. Rushing the process will inevitably cause you to hire the wrong applicant because you haven’t taken enough time to see what talent is out there. This applicant may then make costly mistakes or leave early if they are not suited to the role. Meanwhile, taking months to fill a position and pouring too much money into advertising and hiring recruitment agencies will similarly cause you to waste money.
Plan out the recruitment process and give yourself a date as to when you want to have settled on an applicant. Make sure to also give yourself a budget so that you’re not spending too much money on job ads or recruitment agencies.
Outsourcing too many tasks
Outsourcing tasks – hiring another company to take care of them – can save time and money in many cases. However, it’s possible to outsource too many tasks and end up spending too much money. This could include outsourcing tasks that you can reasonably do yourself such as social media marketing or dismissing employees (some companies actually outsource people to fire employees for them).
Be prepared to take on some tasks yourself and only outsource the tasks that you find overly complex or time-consuming. A few sensible tasks to outsource include accounting, office cleaning and IT support. Keep to a budget when outsourcing and shop around to find services that you can afford.
Waiting for machinery to break before repairing it
Another way in which companies can waste money is by delaying repairs until the point that machinery breaks. Not only are repairs more expensive because they’re now an emergency, it can often result in costly downtime. An example could be a coffee machine breaking in a coffee bar – you could lose out on a lot of customers while waiting for repairs.
Get into a habit of servicing machinery so that you can detect faults early. This could allow you to get repairs done before the machinery fully breaks (you can schedule repairs out of opening hours so that you’re not going a working day without a working machine).
Taking out unnecessary debts
It’s hard to run a business and not borrow money at some point. However, a lot of loans can be unnecessary – especially if they are to cover expected costs that you could have saved up for. There can also be times when companies unnecessarily fall into arrears as a result of prioritizing the wrong expenses. All of this can result in unneeded interest fees and late charges which can add up in the long run.
In order to avoid unnecessary debt, you need to keep a better control of your overall budget (which could mean giving up all the previously listed money-wasting habits). You should also set up some savings that you can dip into instead of having to constantly rely on loans. Many business savings accounts will collect interest so as long as you contribute money on a regular basis.
As for times when a loan is the only option, take the time to shop around so that you can find the best interest rates. Be careful about loans with variable rates in which the interest could rise over time.