When starting and running a business, having a tight rein on outgoings is a must. However, in addition to known business costs, there are a number of hidden business costs that can sneak up and quickly derail cash flow.
That’s why we’ve compiled the following list of charges you need to pay attention to. Find out how you can make monetary savings in the quest to stay cash flow positive.
5 Hidden business costs
1. Staff turnover
Whilst you may have budgeted for staff salaries, pensions and benefits, the cost of staff turnover can be crippling.
According to Employee Benefits News, turnover can cost employers 33% of an employee’s annual salary. Why? That is the cost of hiring. Think about it: recruiters commonly request 20-30% of the new hire’s starting salary; you need to factor in interview costs (time, travel) and then even once you have hired the best candidate, time and resource must be spent onboarding and training them.
Cash flow saver: Take time to understand your team’s pain points and really assess your company culture.
2. New legalities
Legislation is constantly evolving. The challenge to business owners is to keep up or face penalties of the financial kind and otherwise. Take the following example: In the first year of GDPR (General Data Protection Regulation) enforcement, $63 million in fines were issued.
Cash flow saver: Train, learn and train some more. Attend training sessions and seminars to keep up with industry developments and designate a compliance officer (or outsource this function).
If you sell physical products, shrinkage can be a cash flow killer that strikes your bottom line. The unintentional loss of goods due to activities such as short shipments, picking errors, shoplifting or employee theft is estimated to cost $32 billion per year in monetary terms.
Cash flow saver: Invest in inventory management systems and for those in the retail sector, automated cash management technology, to increase security and efficiency.
4. Payment delays
Dealing with late or missing payments is costly. Whilst all your financial commitments may always be settled on time, close to half of all SMEs are running a £30,000 shortfall due to missing payments. Ouch. And that is before you factor in the additional cost of lost staff productivity due to time spent chasing invoices that should have been paid.
Cash flow saver: Be clear in your payment terms and consider switching to Direct Debit to handle your collections. FastPay is an established Direct Debit provider that can get you set up and collecting via Direct Debit within 24 hours; all from as little as 3p per transaction. Take a look at our straightforward, affordable pricing and start saving today.
5. Unscheduled maintenance and costs
Your ecommerce website suddenly needs a new plug in; your marketing team needs a new run of promotional flyers or maybe you need to upgrade your phone system. Taken individually, these expenses may not be great but they can quickly add up to a considerable amount. Especially in circumstances that are hard to plan for as many businesses have experienced in the last few months.
Cash flow saver: Whilst you cannot foresee and prepare for every eventuality, having an amount set aside in your annual budget for contingencies is wise. Funding may also be available for certain business costs and upgrades that you may not have planned for – the government’s Gigabit voucher scheme is one such example where eligible SMEs can get up to £3,500 towards installing gigabit capable broadband.
Secure your cash flow with FastPay
Poor cash flow is the number one reason that businesses fail. Take control of yours with FastPay’s range of Direct Debit solutions.
Devon based business, the Mardon Group, first contacted FastPay as they wanted to cut customer debt and reduce the time spent chasing payments. Since making the switch to Direct Debit, they have “never looked back …new customers with no trading history even pay monthly in advance.”
Get your time back like the Mardon Group by calling 0161 737 5290. Our Direct Debit specialists will talk you through your options and advise you every step of the way.
Alternatively, you can request more details about our services via our online contact form.