17 Ways to Plug Financial Leakages & Save Money in Your Business

Hardworking people struggle financially when they can’t manage their personal finances. Likewise, small businesses struggle financially when managing business finances becomes a job in itself. For most individuals and businesses, plugging financial leakages might be all they need to succeed and not making more money.

These 17 ways to plug financial leakages and save money in your business will open your eyes to managing your business finances effectively. While your business may have been struggling to stay afloat due to factors beyond your control, this cornerstone article will help you minimize the effects of these factors on your business.

The ultimate objective of this document is to help your business make more money, reduce financial burdens, drive growth, increase productivity, eliminate accounting errors, optimize planning and strategy, and give employees and customers an overwhelming sense of satisfaction. You can build a solid financial foundation for your business with these 17 business finance strategies.

How to plug financial leakages in your business

Here are some key ways to eliminate financial losses in your business organization:

1. Differentiate your personal and business finances

It is always a mistake to lump your personal and business finances together. For instance, receiving your business incomes into a personal bank account is a grave error. It is also a mistake to use your business incomes for personal family obligations. So separate your personal finances from your business finances for the sake of clarity, transparency, and tax obligations.

2. Pay off your business loans promptly

Although it is a good idea to borrow loans to start your business, it is not right to continue running your business on loans. Remember that loans come with a steep price; the higher the loan, the higher the interest rate; and the longer the repayment tenure or defaulted payments, the steeper the penalties. Pay off your business loans before and as when due.

3. Diversify your business interests

While it is a good idea to operate your business in your area of specialty, you can diversify your portfolio to gain better leverage. For instance, if you run a transportation company – you can also go into the haulage business, veer into delivery service, and provide on-the-demand drivers to other businesses. With diversification, one successful business may boost a struggling one.

4. Why spend when you can get it for free?

As a business, you may need to work with expensive software, rent high-rise buildings, and operate a fleet of cars. The question now is: why do you have to use paid software when a free version works equally fine? Or why rent a high-rise office when you can convert your garage to an office? Cut down on business costs by using free and cheaper alternatives at all times.

5. Save for business emergencies

Unforeseen things happen in business. Government policies may necessitate huge changes, and a factory accident may cost the business dearly. So save up for business emergencies that may involve vehicle breakdown, high cost of fuel, employee injury or death, market fluctuations, and global crises.

6. Run your business on a strict budget

This is a no-brainer. Running your business without a strict budget is like running around without a clear purpose. Budgets restrain you from unplanned expenses and provide insights into necessary spending. Do not make an office purchase because an equipment is beautiful and you feel you might need it in the future; spend only on what is critical for business operations.

7. Hire or consult financial and tax experts

There are times when outsourcing a job might be cheaper than hiring a staff to do it. And consulting with financial, tax, and sales experts might save your business loads of money. Tax experts may save you huge money and financial analysts may identify and plug leakages in the financial books. For whatever it is worth, hire and work with experts when the end justifies it.

8. Plan for the next decade

Nobody saw the COVID-19 pandemic before it hit. No one knew Hamas in Palestine would attack Israel and paralyze business activities in Gaza. And no one anticipated that Russia would invade Ukraine to the point when it would have global economic consequences. Planning strictly for the next 5-10 years may enable you to navigate effectively when unforeseen events take a toll on your company finances.

9. Bring on investors

Just as everyone needs more money to take care of personal needs, businesses also need more money to drive growth, hire experts, diversify into new markets, and run at a profit. To fully scale your business in emerging economies, you may need to bring on newer investors. Bringing on new investors makes more money available, and it brings on newer connections.

10. Always review your finances

While this is very important, you may not be able to do it alone. You may need the expertise of a financial consultant, certified accountant, or licensed auditor to review your business finances and ensure you are not wasting business funds. Reviewing your business finances may involve reviewing your financial statements, balance sheet, accounting ledger, business subscriptions, employee allowances, and recurring expenditures among others.

How to save money in your business

Below are important ways to save money in your business for better growth and expansion:

1. Improve your financial IQ

How you view money and business finances is very important. In fact, your spending habit or how you manage company finances is dependent on your financial IQ. This means that your money mindset is very important to managing businesses successfully. So what stops you from going to a business school or reading up on money matters online?

2. Go for insurance

Insurance is more helpful than most people view it. Although it is a recurring expenditure, it saves you more money in the long run than without it. If you pay N5,000 monthly as auto insurance, that would be N60,000 in a year; if the vehicle gets involved in an accident within the coverage period and the repair cost is about N350,000, you would have saved around N290,000 or more on your car insurance. The same goes for other aspects of your business.

3. Put money away

Save money for business emergencies and necessities. You may do this automatically by having your bank deduct a certain amount of money every month into an emergency account. Remember that money saved is money gained, and nothing can be truer in business than this. You can also deposit payment bonuses and tax refunds into your business savings account to help with emergencies.

4. Establish good credit

One of the best things that can happen to your business is to have good credit scores everywhere. Paying off your loans on time, buying necessities with credit cards, paying subscription bills on time, and shying from your credit card limits. With a good credit history and scores, lenders would be open to borrowing you more money and suppliers would be glad to do business with you.

5. Boost your revenues

Working to boost your business revenues would go a long way to help you have more money. Improve overall sales, hire more marketing and sales executives, spend more on working advertising models, eliminate unproductive expenses, and block money drains. Everything you do must be targeted at satisfying your customers and boosting your business revenues.

6. Eliminate redundant positions

Whether you run a small or large business, you will save money by eliminating redundant positions or merging two similar positions into one. If software can take over the job of an employee that is unproductive, fire the employee and let software do his job to save money. If two or more company positions are similar or duplicated, merge the positions into one and save money in the process.

7. Invest in other businesses

Running a business does not stop you from investing in other businesses. If you have enough money to spare, you can partner with other businesses to make more money. Investing in other businesses does not make you an active partner, but it may earn you significant income to boost your own business. And do not overlook the opportunity for business acquisition and mergers if it will solidify your position in the market.

Conclusion

To succeed at any business, you must lock money in by plugging financial leakages and boosting revenue capacities. This is a process that may involve tracking your finances, overhauling your marketing techniques, eliminating redundant positions, investing in other businesses, hiring leading experts, and outsourcing to independent contractors. It might also be cheaper to automate your business activities than you hire paid employees over a long period of time.

You may also need the services of external auditors and consultants to take your business to the next level of financial security and economic leverage. Protect your business from market fluctuations and global outages as you employ the 17 ways to plug financial leakages outlined in this guide. Do not forget that you must constantly review your business finances to ensure that you are not spending money you did not budget for or spending money for personal non-business needs.