Stop wasting your money - Military Careers, Second Careers - Army Times

Stop wasting your money

As the saying goes, you’ve got to spend money to make money. But no one wants to waste money. Most entrepreneurs are careful spenders, but all of us, from time to time, squander our precious funds.

I’m not talking about spending money to create a new product that doesn’t sell or to develop a sales channel that doesn’t bring in income. Growing our business inevitably leads to some dead ends. But we all waste money in less useful ways, and those are dollars we can recapture.

First, let’s recognize some of the most common ways that small-business owners and managers misspend their money:

• One-shot advertising. Sales are low or a hotshot ad salesperson calls us, so we suddenly buy an ad or send out a direct mail piece.

• Over-purchasing inventory. Sure, you get lower prices when you buy in bulk, but then your cash is tied up in products sitting in a warehouse. With perishables (such as in a restaurant or florist), your excess inventory literally rots away. With seasonal merchandise, your inventory ages and loses value.

• Finance charges. Borrowing money can help you grow your business, so some of these fees may be reasonable expenses. But when you’re accruing finance charges because of poor cash management, that’s just money wasted.

• Sticking with noncompetitive suppliers. Entrepreneurs are busy people, so once we find a good vendor, we stick with them. But vendors can start taking us for granted. Prices creep up; quality slips. We fail to see if they’re still competitive.

• Failing to bill clients. Yep, you’d be surprised at how many businesspeople, especially consultants, fail to bill their clients in a timely fashion. Eventually, you may decide it’s too late to bill them; they move away or go out of business. Money lost.

• Poor customer service. It’s much more expensive to acquire a customer than to keep one. So cutting back on good customer service is a false economy.

• Mistreating employees. High employee turnover is a huge waste of money. It takes a lot of your resources — time, attention and dollars — to find and train new employees. It’s a lot cheaper, in the long run, to pay well, provide competitive benefits, and most importantly, create a positive work environment.

What can you do to reduce this waste of money and keep more dollars for productive uses?

• Develop an annual plan. An annual plan helps you figure out how you want to spend your money. You know what you want to do and, as importantly, what you do not want to do in the coming year.

• Develop an annual marketing plan. You’ve got to market your business to attract customers. Advertising that makes money must be repeated and planned.

• Send your invoices on time. Do your billings regularly, every day, week or month. Do not let this slip.

• Manage your credit cards. Develop a spreadsheet with all your credit cards. Know exactly how much interest you are paying on each one and due dates. Manage these carefully.

• Pay your bills on time. You’ll get far lower interest rates on loans and credit cards if you have good credit history. Even if you can only pay minimum amounts, make sure your credit record is clean.

• Comparison shop. Once a year, shop for deals on services and products you already use. Get competitive bids even from vendors you’re satisfied with.

• Develop “just in time” inventory management. Work with your vendors to see how quickly they can replenish your inventory. Even if you spend a bit more per item, you may free up a lot of cash for income-producing activities.

• Get help. Many entrepreneurs are “penny wise and pound foolish” when it comes to spending money on accountants, bookkeepers or attorneys.

• Treat your employees well. Pay them well, provide competitive benefits. Say thank you.

• Be honest. Run your business with integrity. Employees mimic what they see. You are less likely to be the victim of embezzlement or theft if you’re honest in all your dealings. And you’ll save the cost of losing customers, not to mention lawsuits.

In a small business, every dollar is precious, so spend your funds wisely.

Rhonda Abrams writes Gannett News Service’s Small Business column. She is the author of books for entrepreneurs. Her latest is “Trade Show in a Day.” Register for her free business tips newsletter at www.planningshop.com.