There is nothing more rewarding than the journey of entrepreneurship. Starting your own small to medium enterprise is an exciting time, at OneHQ, we continuously stress the importance of a well thought out plan and business strategy to ensure business success. Within this strategy should be a thorough expenses and forecasting section, but often its impossible to foresee it all, there are many hidden costs that businesses don’t account for. Peter Prema, an Accounting partner here at OneHQ, put a list together of some of the expenses he wants SMB’s to look out for.
Equipment repairs, services and replacements
After a while, a lot of your equipment may need upgrading, repaired or even serviced. IT upgrades are one of the biggest hidden costs of having an SMB.
Shrinkage is a hidden cost most businesses don’t want to confront. Things like paperwork errors, employee theft, shoplifting and so on all need to be accounted for.
Delay in payments
Delayed payments can be the death of small businesses and unfortunately, it happens far too often. Costs mount from SMB's having to put enough by in cash reserves to survive or pay fees and interest on overdrafts and loans while waiting for payment. Consider putting in Direct Debit options where possible to help prevent this and never allow your customers a ’90 day to pay’ invoice. If you insist on 14- or 28-day payment terms you receive money faster can pay your own bills faster, and can reinvest the money in your business faster.
Employee bonuses and tax
You can budget for employee salaries but what businesses usually forget is the added extra that comes along with this, like bonuses, health insurance or holiday pay. Businesses should always keep a separate tax savings account and not fall into the bad habit of using funds for tax to support their business.
Subscriptions & Networking
Memberships, networking, licences and subscriptions come hand in hand with running a business. Make sure you review these annually if they are no longer of use or beneficial remember to cancel them.
The productivity of employees is an SMB’s most important asset. Unnecessary meetings, email overload and anything which interferes with your employee’s productivity can cause your company to endure a cost. It is important to be organized so that you can get to where you want to be. Your time is included in this, time wasted is money wasted. Ensure all the tasks that you or your employees are involved in are worth the cost of the time involved. Offer a range of different work areas for employees that are best placed to maximise productivity and limit the hidden costs of underperforming staff.
Hiring and firing
Replacing one member of staff with another can be surprisingly costly. Research shows that it can take up to 24 weeks for a new employee to be fully productive, not to mention the cost of recruitment, advertising and time spent having to interview candidates. Make sure you have a speedy but thorough recruitment process to limit costs here.