6 Reasons Your Business Is Hemorrhaging and Losing Money

Money mistakes can add up

If your business isn’t making a profit and losing money, it’s not a good sign. Without money in the coffers, there is no way to invest in the essentials that you need to succeed. It’s a vicious circle and one that doesn’t end until you make more money or file for bankruptcy. Of the 80% of startups that don’t make it past the first year, a lack of profit is the reason the majority fail.

Lots of new businesses find it challenging to stay out of the red because small things can get in the way. Before you know it, they escalate and you’re dying as a result of a thousand tiny paper cuts. Even if they start slowly, they will eat away at your budget and account for a sizeable chunk in the not-so-distant future.

You must identify the reasons why you’re losing money before it’s too late, which is why the following tips are essential. The sooner you spot them, the quicker you can find a solution and start turning a net profit.

Lazy Bookkeeping

As a small business, you may feel the need to cut costs wherever possible to reduce your outgoings. Accountancy is an area that bosses feel comfortable with doing themselves because it doesn’t seem too challenging. Plus, a professional accountant costs a couple of hundred dollars a month, the money you can reinvest into the company.

But, to have any chance at plugging the leak, you’ve got to understand numbers and know them like the back of your hand. Entrepreneurs that don’t can’t keep track of their expenses and overspend as a result. Laziness is the enemy, so you need to write down everything that relates to your business’ budget. Transactions are never too small or unimportant to forget altogether.

Keep in mind that the quicker you log the data, the more informed you will be about your expenses. Why? It’s because the books won’t represent the real picture with regards to your budget and you’ll spend money you don’t have in your account. For those who can’t afford an expert, it’s essential to be as proactive and organized as possible to save money.

Consolidating Loans

Merging three loans into one is super easy and manageable. With fewer arrears to think about, there is no need to worry about missing a payment and incurring late charges. Pay the single interest rate on time and you can forget about your debts for another month – it’s about as hassle-free as conducting business gets in this era.

Of course, there is a catch: you pay more with a consolidated loan. Once multiple debts become one, the interest rates get smaller as do the monthly repayment amounts. Because of this, you will fork out more in the long run as the loans will last longer and become pricier. The cost of a comfortable life may be as much as a couple of grand per year depending on the loan.

It’s not too difficult to keep the money in the company’s coffers. Like most things business-related, it’s about being organized. By setting up bank transfers, you can pay off all of your arrears month-by-month as long as there is enough cash in the account. Split up the amounts so that you contribute more to the smaller debts first and pay them off quicker. That way, you’ll accrue less interest. Once they’re paid up, you can increase the amounts on the bigger loans and wipe them off the balance sheet, too.


Crime is something that happens to other firms, not yours. And, if it does, the damage isn’t severe. Sure, a couple of computers may go missing, but everything else is secure and hard to move. Business assets, for example, aren’t easy to steal when they’re bolted to the floor and weigh a couple of kilograms.

However, not all crime is born the same. Sadly, employees feel the need to skim off the top and supplement their wage by taking from the company’s pot. White collar crime is a real danger for businesses because it can happen at any time without any indicators. These felons aren’t career criminals – they’re middle-aged and seize an opportunity when it pops up.

Fraud is the most common form of crime that may affect your budget, so be sure to go over the balance sheet regularly. And, don’t put your faith in one person because they may be the culprit. Instead, get an external source to forensically examine the records to see if money is being hidden for personal gain. Employees that commit crimes can cost the company money, too. If they launder cash or accept bribes, your business will be liable for prosecution that ranges from a huge fine to a prison sentence.

Poor Investments

Poor investments lose money, but at least they class as an investment. Probably the worst thing you can do is put your surplus cash into a savings account. The interest rates are low and aren’t worth the returns they provide, not when you can earn a 10% ROI on investment. 

The key is to pump money into what you know in the beginning. Knowledge is power, and without it, you don’t have any of the latter. If you’re a real-estate business, for example, consider the insurance and mortgage markets. Next, don’t put all of your eggs into one basket. By diversifying your portfolio, you can reduce the risk of one bad investment costing you a small fortune. And, there’s no need to take a gamble on opportunities that you don’t understand. Branching out within your specialist area is as smart as diversification as any other. Of course, you can always opt for the investments that are as close to sure things as they are in the market.

The likes of Coke and Apple, while not mega earners, are steady and will represent a stable profit over the medium to long-term. It’s better than getting a substandard amount back from a low-rate account. Always reinvest the money back into the firm to aid growth, and spend it wisely. The best initiatives are the ones that focus on making the company more efficient and, therefore, productive.

Bad Product Pricing

Giving a product or service a price seems like the simplest thing in the world, but it isn’t. Far from plucking a number out of thin air, you’ve got to take various factors into account. The first, of course, is how much money you spent to create the product and what represents a fair markup. Looking at your competitors will help you if you need inspiration as they will have similar outgoings.

Aside from the production process, there is also the market to consider. Some customers may pay a pretty price, and others may decide it’s not worth their hard earned cash. Finding the middle ground is essential, and market analysis is the answer. MA is an insight into how consumers think and feel and what they are willing to pay, which is why you need to conduct it properly. Start by deciding the purpose and your base, and move onto collecting the right data and analyzing the trends. Once you have the information, you can tweak prices to reflect the perfect price ranges.

Under or overpricing products and services result in a loss of profit, which is why both of them are bad news. If in doubt, you can ask your customers what they are willing to spend and why.

Low Credit

There it is – your credit score coming back to haunt you again. A bad rating isn’t healthy for businesses because it cuts off all revenue streams. You will need a loan at some point, yet the banks won’t accept your application if they think you’re a risk. And, your credit score tells them that you are not worth the gamble. Other loan options are available, but they are either too small or too risky.

The good news is that you can fix your rating in a couple of steps. The first port of call is to start being punctual with your payments. The more you miss deadlines, the worse your score will get in the short and long-term. Pay up and do it on time to show that you’re not going to default. Next, try and reduce your current default balances. Chipping away at them will result in a healthy score in the not-so-distant future. Also, don’t be afraid to talk to creditors. Setting up a repayment schedule will prevent you from defaulting again as long as the terms are beneficial.

However, none of the above is realistic if you don’t keep tabs on your rating. Nowadays, agencies provide free scores, and you should exploit the service to understand whether you need to start rebuilding. Usually, your bank account will include a free report every month.

As well as these six tips, don’t forget about your online presence. Without a broad internet reach, you will miss out on opportunities to generate leads and make sales. Raising brand awareness is about utilizing a high-quality website and interacting on social media.

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