McVay Business Services - Accounting & Tax Services Pensacola, FL
As a small business owner, you work tirelessly every day to keep your business afloat and, hopefully, see it grow.
You seem to be making headway – attracting new customers, finding better ways to accomplish tasks and achieving revenue growth. Yet, when you sit down to examine your profits, you don’t find any.
As much as you try to keep on top of your bookkeeping, you’re unable to pinpoint what exactly is causing your cash flow problems and preventing you from turning a profit.
If this situation sounds painfully familiar, hidden costs could be the reason you’re not making more progress in growing your small business profits. Keep reading to discover three hidden costs you may not be accounting for and what actions you should take to put your small business on the right path.
Hidden Cost #1: Employee Theft When you look at your books, are your cost of goods sold numbers higher than projected? Are they higher than your industry averages?
While you might simply have a distribution problem, it’s also likely that you have a more insidious (but easily solvable) problem: shrinkage or employee theft.
When left unchecked, employee theft can devastate a small business’s cash flow and bottom line. This problem may be particularly acute for small businesses such as retail shops or restaurants.
The Solution: Keep good records and Invest in surveillance and security
As much as you may trust your employees, if your numbers just aren’t adding up, it’s important to determine if you have a shrinkage problem. Consider installing more surveillance cameras throughout your location to identify if employee theft is cutting into your profits. If you’re able to identify a thief, the long-term benefits of your investment will easily outweigh the short-term costs.
Having up-to-date records and a system in place to track inventory is critical. These records will provide you with an early indication that there may be a problem. Meeting with your accountant or bookkeeper monthly to review these records will help you to more quickly confirm a problem exists.
Hidden Cost #2: Employee Turnover Any small business advisor or accountant would advise you to never overpay for your employees’ salaries and benefits. While this is good advice, there is a significant risk of underpaying your employees: turnover.
Employee turnover has a devastating effect on small business cash flow. When one of your employees quits, you need to spend money looking for a replacement and, eventually, training one. Plus, you may also lose productivity while your new employee learns his or her new role.
The Solution: Strike a better employee compensation balance
If you’re losing too many employees to turnover, sit down with your small business advisor to determine what kind of compensation or benefits increases you can reasonably afford. When conducting your analysis, keep in mind the financial impact turnover has already had on your business.
Hidden Cost #3: Missing Out On Big-Picture Strategy As you pore over your books to understand why you’re not making a profit, consider how much time you spend, well, poring over your books. Many small business owners are bogged down in nitty-gritty accounting details and, as a result, aren’t focused on developing strategies to attract new customers and grow their businesses.
Let’s face it, you didn’t start your small business because you love processing payroll, filing quarterly taxes or reconciling your books at the end of the month. If you spend too much time on these tasks, your business suffers since you don’t have enough time to focus on your strengths and help your business succeed.
The Solution: Outsource your bookkeeping and tax responsibilities
If you’re trying to manage your bookkeeping and taxes yourself, it’s likely you’re doing so out of a noble desire to control costs. However, finding an affordable small business advisor may be easier than you think, and the time you save by outsourcing these tasks may be just what you need to focus on other priorities that help to improve cash flow and profitability.
Identify Your Hidden Costs To Solve Your Cash Flow Problems When you take the time to uncover the hidden costs draining your profits and killing your cash flow, you’re taking action to put your business on the right path. If you’re unsure where to begin, speak to a small business advisor who has the expertise to help you find the root causes of your problems.
Do you have the support you need to manage your small business cash flow and taxes? Schedule a 30-minute appointment to speak with a local (Pensacola Florida Accountant) small business advisor. QuickBooks ProAdvisor Certified. Payroll and Income Tax Specialist. 850-725-5696
Mike McVay, Tax Accountant Blog
Certified QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL
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