Can a Business Lose Money Without Noticing Can a Business Lose Money Without Noticing

Can a Business Lose Money Without Noticing?

Huge financial losses are sure to cripple a business, but it hurts so much more when money is going down the drain without anyone noticing. With tools such as electronic invoice management and business intelligence, you would think a company is better equipped to avoid such problems. Some losses, however, are hidden in plain sight.

Unnecessary Service Fees

Ever wondered why some retailers don’t accept plastic or credit cards? This is usually something to do with the fees associated with such payments.

  • Many payment transactions between different merchants come with fees that vary in amount. One merchant may impose a 1% fee while another asks for 3 or 5%.
  • You may be paying risk fees or network fees that have increased without prior notice. Or, notices were sent but overlooked. If your financial audits are scheduled quarterly or annually, the amount would have added up before you discovered it.
  • Certain fees are negotiable, but only if you know you’re paying for them or that the merchant is open to negotiation.

Duplicate Invoice Payments

Continued innovation has made it easier for businesses to handle financial transactions with ease. But even top-performing companies can pay for the same invoice twice.

  • Your invoicing process may be slow or inaccurate, resulting in your business losing money without notice.
  • Late billing with failure to follow up on overdue payments not only hampers cash flow but also causes financial loss somewhere along the way.
  • You don’t have a system in place for flagging duplicate invoices, whether upon receipt or payment.
  • You’re still using paper invoices that are at high risk of getting lost in the pile and are harder to reconcile.

Unchecked Subscriptions

If your company is using software, tools, and other subscription-based apps, you’re likely to pay recurring fees monthly or annually. What are the odds that you’ve been paying the service fees without using the service at all?

  • Keep an eye out for all recurring subscriptions and whether or not you or any of your staff are using the services subscribed to.
  • Make sure that the subscription fee is commensurate with usage. If only five employees are using a corporate account for 20, switch to a different plan.
  • Check if paying for a group account is more cost-effective than individual licenses or subscriptions. The schedule controller checks quarterly to prevent financial loss.

Operational Inefficiencies

Inefficient practices will cost you more money than you think. And costly inefficiencies can happen even in the most basic business operations.

  • Identify redundancies that are costing you money but you can remove without a negative impact on the overall operation. When you set up the business, for example, hiring a receptionist may be the norm. But with the advent of the electronic phone system, a receptionist on your payroll is more expensive.
  • Manual data entry is prone to human errors, inconsistencies, and inaccuracies, all of which are costly.
  • Failure to automate where possible can lead to financial loss and inefficient operations. Automating repetitive tasks, for example, frees up your time and your employees’ time for more vital tasks.
  • Not outsourcing when it makes the most financial sense could cost your business. Why pay for an in-house HR team when recruitment needs are seasonal or seldom?

Lack of Financial Control

Without proper and organised expense management, your business could be bleeding money, and you won’t even know it. Think fraud or embezzlement that siphons funds in small amounts or in increments that blow up by the thousands or millions.

  • There should be a system in place for expense control and management. Any funding request, for example, should be controlled, documented, and approved before any transaction can occur.
  • Make sure that the system or tools used operate in real-time to prevent any malicious intent from sneaking in between.
  • Implement financial controls using generally accepted accounting principles or industry-standard practices.
  • Check for any issues in your accounting workflow. Inaccurate recordkeeping and billing delays will create a costly bottleneck.

Poor Expense Tracking

Having accurate and clear data on your business’s spending patterns can be likened to having the right financial adviser. You get a clear picture of where most of the funds go and what necessary adjustments are needed to keep everything balanced.

  • Implement a system for tracking your spending carefully and accurately. This means taking a deep dive into the money flow, from small purchases to bigger business expenses.
  • Collect real-time data on both past and present spending to help you make data-driven purchasing decisions and identify where to spend and save money.

Financial loss in business isn’t always explosive, where thousands or millions are lost due to one or two mistakes. It can also happen in small transactions and details that you may have overlooked. So make sure to regularly check for financial leaks and fix any problems uncovered immediately. To help prevent costly errors, take advantage of automation tools from Futurelog.