In the dynamic landscape of business, it’s imperative to recognise and rectify the leaks that can hinder growth and profitability. Four key areas that demand attention are:

• Sales down by bad debts,
• Slow to reduce labor,
• Expenses too high and
• Tax bills that can’t be paid.

Addressing these issues is not just a matter of financial management but a strategic imperative for sustainable success.

Firstly, bad debts can significantly impact a company’s bottom line, leading to a decline in sales. Businesses must implement robust credit management policies, conduct regular credit checks, and establish clear terms of payment to minimise the risk of bad debts. This proactive approach ensures a healthier cash flow, enhancing the overall financial health of the company.

The second area that often goes unnoticed is the reluctance to streamline labor costs. Businesses must critically evaluate their workforce’s efficiency and consider necessary adjustments to maintain a lean but effective team. Identifying areas for automation and skill development can contribute to increased productivity and reduced labor expenses.

Thirdly, keeping a close eye on expenses is crucial for financial stability. Regularly reviewing and renegotiating contracts with suppliers, optimising operational processes, and embracing cost-effective technologies can lead to significant savings. A culture of fiscal responsibility must permeate the organisation to curb unnecessary expenditures.

The challenge of unpaid tax bills is another pressing concern that businesses must address promptly. Failure to meet tax obligations can lead to severe consequences. A proactive approach involves regular monitoring of financial statements, setting aside funds for tax payments and always seeking professional advice to ensure tax compliance.

To effectively tackle these issues, it is paramount for the owner or proprietor to allocate 2 to 4 hours per month for a thorough review of the company’s financial landscape. This commitment to regular analysis and strategic planning can pave the way for identifying and sealing leaks within the business.

Some solutions to these issues are:

1. Make sure you use a good Point-Of-Sale system.
2. Staff need to request payment from clients and advise terms and consequences of not paying.
3. Create terms with your new clients where they must pay within 14 days
4. Follow up texts after that and calls if they’re ignored.
5. Hold good or services or refuse future work until paid.
6. Put orders last for clients that don’t pay on time, and work on for the clients that pay first!
7. Send out copies of invoices after 45 days.

In conclusion, closing these leaks within your business can have a profound impact on its profitability. By addressing bad debts, optimising labor costs, controlling expenses and managing tax obligations, businesses can fortify their financial foundations. The commitment of a few hours each month by the owner or proprietor to scrutinise these aspects can yield substantial returns, leading to a more resilient and prosperous business.

If you need any further advice or assistance with stopping these potential leaks within your business, please get in touch with Terry Murphy of Accountants and More on 1800 456 333 or send us an enquiry.

NOTE: This is general advice only and needs to be checked with your accountant. Feel free to get in touch with us to discuss how we can help.