5 Things Your Business Does to Save Money That Make You Lose MoneyAbbakin
Here are a few things your business does to save money that can ultimately hurt more than they help. If you find that your profits are shrinking and you’re struggling to pay your invoices, you’re most likely looking to cut costs.
Or your business may be doing fine, but you want to scrape up some extra revenue to start padding your own retirement fund. Many businesses look to cost-saving measures to help increase profits, only to watch them sink later.
Below is my list of 5 things your business does to save money that can ultimately affect your growth in the near future.
5 Things Your Business Does to Save Money That Make You Lose Money
A round of layoffs usually signals the beginning of the end for most businesses. Getting rid of some of your payroll costs may seem like a quick fix to struggling finances, but the negatives to layoffs far outweigh the positives.
You’ll lose experienced employees, and morale among those who were spared from the layoff will decrease and they will begin to feel insecure in their own jobs, damaging productivity and reducing employee loyalty.
You can also damage your reputation as a strong leader in your industry, causing investors to question your abilities and driving away long-term customers who may consider it a sign that you aren’t doing well.
#2. Reducing Compensation
You get what you pay for, right? This bit of wisdom is found throughout the world in almost every area of commerce, from quality products to investment services.
The same is true for your employees. Many businesses are quick to try to cut costs by reducing employee compensation, either through a reduction in salary, benefits, or hours. However, these methods of trying to save money often backfire, costing you more in the long run.
You lose money by losing your best employees to the competition, or just to a better paying job. Offering a strong compensation package to your employees and creating a culture of mutual support and help reduces employee turnover and increases productivity;
taking away compensation results in having to hire and train new employees, which is expensive, and reduces employee engagement and motivation.
#3. Reducing Training
Well-trained employees are more productive, make fewer mistakes, and are more confident in the work that they produce.
It might be tempting to forego the added expense of employee training to shave some costs off your overhead, but like most quick-fix money saving schemes, this is one that can cost you in the long run.
Keeping your employees up to date on software training and industry best-practices is essential to keeping up productivity and revenue.
#4. Cutting Legal Corners
Many businesses drop the ball when it comes to making sure that their legal needs are covered and met. Paying for legal services often seems like a waste of money when things seem to be going well—right up until you find yourself in legal trouble.
Spending the money to ensure that your contracts, your hiring practices, and your HR department are meeting all your legal responsibilities is well worth the up-front expense.
With the right protections in place, you won’t have any problems. Without them, legal costs can bankrupt your business if something goes wrong.
#5. Not Investing in the Business
The price of a new software system or updating hardware can seem prohibitive. But keeping up with industry standards and using the most efficient equipment or programs can end up saving you money in the long run.
Sure, the initial cost might seem high, but look at the long-term savings and increased productivity that such an investment might bring.
You may wind up spending more money doing things the way you’ve always done them if you don’t keep up with the modern business environment.
Now you have it: 5 things your business does to save money that eventually make you lose money at the end. For many businesses, these lessons are learned too late. Do some research and think about your long term goals before you decide to try any of these methods to cut costs.
About the Author:
Alana Downer is a financial advisor, supporting both individuals and businesses on their way to financial stability. Alana is also a team leader at Learn to Trade, a reliable educational resource for traders and investors. Personally a productivity freak, Alana enjoys working till late evening hours while listening to productivity music.