Beware of These 6 Hidden Business Expenses That Impact Profit
Some expenses are to be expected when you’re running a business: the rent for your office space, your employee’s salaries, the cost of equipment, and so on. But over time, less noticeable, smaller expenses can also add up, quietly sabotaging the financial well-being of your company if you’re not careful.
Fortunately, if you know the common culprits and employ sound financial management, you can reduce or even eliminate these pesky little expenses before they run away with your profit. Keep reading to learn more about these hidden expenses and how to navigate them.
Culprit #1: Unused Subscriptions
You know how it goes. You start a free trial, forget to cancel it, and then end up paying for something you’re not using. We all do it personally, and it happens professionally, too.
A good way to prevent these unnecessary expenses is to keep track of the subscriptions your business has (on a spreadsheet, for example) and then periodically go through them and check to see if anyone is actively using them or not. If they aren’t being used, cancel them and save the money!
Culprit #2: Merchant Fees
While you probably can’t avoid merchant fees altogether – after all, most small businesses accept credit cards and other forms of electronic payments – it’s important to make sure you’re not using a merchant service provider that charges really high or unnecessary fees. In other words, do your due diligence before picking a merchant service provider and select one whose fees are in line with others in the business (and not exorbitant!)
Culprit #3: Finance and Interest Charges
These fees can sometimes feel somewhat sneaky. Maybe you’ve borrowed money for business purposes or are carrying a credit card balance. If you don’t watch out, you’ll get hit for interest and other finance fees. These can be high too, especially if your personal credit is poor.
Our advice here is to stay away from borrowing if the interest rate and/or finance charges are too high. Try to find and use products with lower rates and fees instead. Work on improving your credit score before borrowing. Generally, the higher your score the lower the interest rate.
Culprit #4: Late Penalties and Overdraft Fees
Similar to finance and interest charges, if you’re not careful, you might rack up late penalties and overdraft fees that gradually chip away at your profit. How? By paying your bills late and not keeping enough funds in your bank accounts.
Luckily, there’s an easy way to prevent late charges: automate your bills. Doing so will ensure they get paid reliably and on time every month. Likewise, setting up automated bank alerts that notify you whenever an account drops to a certain threshold so you can replenish it will help you avoid overdraft charges.
Culprit #5: Multiple Insurances
It’s critical to carry insurance both personally and as a business owner. Having said that, insurance policies can sometimes overlap, and when they do, it means you’re overpaying. Not only that, but insurance is often expensive in general.
To limit your expenses in this area, look over the policies your business currently has to ensure:
you have the insurance your business needs
you’re not paying too much
none of the policies overlap
If you’re at all unsure, ask an insurance agent for some guidance and help.
Culprit #6: Equipment Warranties
Finally, pay attention to warranties. As a business owner, you should take the time to occasionally evaluate your warranty renewals. If the piece of equipment in question has a short lifespan (like an inexpensive printer, for example), it doesn’t make sense to worry about any warranties. On the other hand, businesses can save money if they renew the warranties for more expensive equipment with longer lifespans so they can be replaced for no cost or low cost when they wear out or break.
A Final Word from Tuesday P. Brooks, Owner of AJOY
So, there you have it! Six “hidden” expenses that many of us small business owners often overlook or forget about, to the detriment of our bottom lines. Being aware of these expenses is the first step. This is yet another reason to have regular, professional bookkeeping in place. Make sure to periodically check in on where these expenses stand and see if you should be adjusting them or eliminating them entirely. Armed with this knowledge, you’re in an excellent position to better protect your profit!