(An accountant’s take on where your bank account is leaking.)
Looking for ways to decrease expenses? After over 15 years running a business there are things I drastically reduced spending my money on. These expenses are why I create certain expense accounts in client books to shine a light on expenses that otherwise get buried in accounts like marketing, office supplies or office expenses. As a result, I found ways to cut expenses and be more mindful of my purchases. You won’t be surprised to learn that software is a flood of money leaving your bank account, but there are other expenses quietly draining your bank account. Let’s take a look.
Marketing Giveaways
Let’s start small, with something almost every business owner has bought at some point: marketing giveaways. If you’ve attended any events with vendor booths, there are no end of pens, magnets, pins, notebooks, mugs, tote bags, and more. While you may have picked up some of those things from the various tables, how much of that stuff did you keep once you got home? Did you need another notebook to join the other five already in a desk drawer at home? Do you have room to cram another mug into that kitchen cabinet?
In fact, I wasted money on pens and magnets in the past that cluttered up my closet for far too long. My only expense now is business cards, which I purchase in small quantities. Running a virtual business means you have few opportunities to hand them out.
Office Supplies
Office supplies are a 186 billion dollar industry. How much are you contributing to that? As I am writing this, it’s back to school time. Every store you walk into has tempting displays of cool looking notebooks, pens, highlighters, desk organizers and more. Please walk by those displays.
For example, I’ve worked in offices where replacing a pen that had run out of ink was a challenge to offices where an entire room housed piles of office supplies along with a graveyard of non-functioning calculators, monitors, etc. Gather all your office supplies in one place and do an inventory. Then, donate excess supplies and promptly dispose of electronics that no longer work. As for the desk accessories, choose from your collection of mugs. They make great pen holders.
Software
Software is a necessary tool to run any business. However, from my observations of reading many income statements, after employees or contractors and rent, software is the next largest expense for any organization. I create a separate software expense account for every client I work with. Burying software expenses in office supplies or office expenses prevents you from seeing how much you are spending on software.
Additionally, software is often an automatically recurring expense and it’s easy to lose track of subscriptions you meant to cancel. For software that I pay for annually, I use a virtual card that I lock right after the first charge goes through. Unfortunately, too few companies send reminders a subscription will renew soon. The email from the software company about a failed payment is the reminder for me to either unlock the card or cancel the subscription.
Apps market themselves as the solution to every business challenge you have. However, some apps deliver, many don’t. Here are some things to consider before allowing that recurring expense to continue. Is that app solving the problem you intended it to? Is it consistently used? Does the reason you purchased the software still exist? Are you paying for apps with overlapping functionality? Could that subscription give hackers another place your data is hacked or stolen? Too many apps can also mean your data is too scattered, leaving you without a clear picture of your business operations.
How can you slow the flood of money you are spending on software? Set aside time each quarter (or sooner) to review your software expenses. Consider the questions above and create your own checklist items to efficiently review the software you are paying for.
Memberships
Subscriptions don’t stop at software. Memberships are another quiet, recurring expense worth a second look. Whether it’s professional organizations or communities for learning, memberships quickly add up. You had good intentions when you paid for those memberships but there are only 24 hours in a day. Take a hard look at how you are benefiting from those memberships.
Do you have time to attend webinars, work through course content, join in group discussions, use the resources? There comes a point where it’s time to stop consuming content and start doing. What drove me to reduce my membership expenses is the guilt over not working through the courses that often come with community memberships. Meanwhile, those communities kept adding new courses that I couldn’t possibly keep up with. I took a hard look at why I had joined those communities, the time I had to devote to those communities, and what benefits I was really seeing. Then I started cancelling memberships.
In my own books and client books I created a professional memberships expense account. It’s an account you should review on a regular basis. Ask yourself whether you are using and benefiting from what you are paying for.
These are just some of the expenses that are quietly draining your bank account. The first thing I do for clients is to customize the chart of accounts (categories). A chart of accounts customized for your business will provide better insights into your business. Finally, setting aside time to study your income statement (profit and loss) on a regular basis will help you identify areas for improvement in your business.
Want some help slowing the flow of money out of your business? Book a call now!