Hidden Costs for Small Businesses: How to Reduce or Avoid Them

Business Owners Discuss Hidden Costs of Running a Small Business

You might know all the obvious costs of running a small business, such as office rental, payroll and inventory or equipment purchases – but how many of the hidden costs to running a small business have you considered and planned for?

In this blog, we’ll outline some of the key hidden costs that new or small enterprises may not know about, how to reduce or avoid them, and how to plan for any eventuality.

Office rental & utilities hidden costs for SMEs

In all likelihood, you will already have a plan in place for this expense – but there are still some costs you may not have thought about. First up is utilities: You need more than a space to put a desk; you need lights, water, internet, parking and more. For South African businesses, you’ll also need to plan for loadshedding, either by investing in a UPS or ensuring that your office has a generator in place.

Another cost you may not have planned for is a changing team size. If one of your employees leaves, you’re suddenly paying for space you don’t need. Similarly, if you increase the size of your team, you’ll need to move offices to accommodate them, which attracts costs such as moving companies, deposits on new spaces, etc.

The solution

When you’re just starting out, think about whether an office is truly necessary. Many internet-based companies can easily operate on a remote, work-from-home basis, saving you significant overheads. A downside of working from home is, again, the ever-present issue of loadshedding – do you and your remote employees have a back-up in place for power cuts? 

Should you already have an office in place, or if your business demands a physical workspace or storefront, loadshedding will be an unavoidable factor that is sure to impact your productivity and, therefore, profitability. While generators might seem like a big expense, they pay for themselves by keeping the lights on and your team working. You can learn more about the impact of loadshedding on your small business.

If your company doesn’t have the cash on hand to invest in alternative power sources, fast funding that is responsive to your business’s needs is a great solution. At GroWise, we consider all aspects of your business to ensure that our loan terms are within your capacity – in a sense, we invest in the profitability of your business, and ensuring a steady power supply is sure to boost your productivity as well as your bottom line.

For office-based businesses, shared workspaces can be an excellent answer to your office needs. There are lots of these innovative office models around, and they offer flexibility that can be crucial for a small business. If an employee leaves, simply take their desk rental off the bill; if you hire a new team member, add a desk to the bill. You’ll also have access to professional meeting rooms, without having to rent them full-time.

As an added bonus, most of the workspaces in SA have generators in place and packages that include utilities, so you won’t get hit with any unexpected expenses at month-end. However, there is the small issue of deposit, which can end up putting you on the back foot. If you need a small, fast loan to cover your deposit so you can get your office up and running, we can help.

Hidden legal & accounting fees

Many small businesses struggle with this question in their early days: Do I try and handle all accounting on my own, or do I pay a specialist a hefty fee to do it for me? Luckily, the solution is more obvious than it may seem.

The solution

Outsource your accounting – it’s that simple. Unless you are a qualified CPA and have an abundance of time to pour into managing your books, hiring external accounting services will save you valuable time, money and effort. 

If your accounting needs are relatively small, there’s no need to hire a full-time accountant on your payroll. Rather, find a company that specialises in small business finances. Often, the fees will be very affordable, often running as low as ±R2500 p/m. 

Getting a specialist to ensure your books are in order will also prevent fines and penalties enacted by SARS for late, missing or incorrect payments. These fines are extremely punitive and it will be much cheaper to outsource your accounting needs to a specialist in the long run.

Another benefit of having an accountant taking care of your business financials is that you can work with them to plan your fiscal budgets. Based on their insights, you should be able to determine when your business may become less profitable, depending on factors such as a seasonal market. This will allow you to plan ahead, securing the funding you need to cover your expenses before they start to pile up and put your business in the red.

Avoid delayed payments

This is arguably one of the most frustrating issues to face, but one that is unfortunately almost impossible to avoid. Clients will inevitably miss payment deadlines, or take ages to pay an invoice once generated, and if your small business is relying on these payments in order to pay your own bills, you may be forced into expensive overdraft to cover your expenses.

The solution

Before entering into an agreement with a customer, set clear payment terms and deadlines. If you’re invoicing on the 25th of each month, insist that payments are cleared in your account by the end of the same month; if your customer is unable to achieve this, you can either agree on a solution that works for both of you, or at the very least, you’ll be able to plan your finances according to the expected payment date. 

If this option isn’t open to you, fast small business funding can provide the protection you need. At GroWise Capital, we have designed a dynamic system that can deliver the funds you need within 24 hours – in some cases, you can have the cash in your account within just 45 minutes. 

This is especially crucial in scenarios that you did not expect and have not planned for. If a big client’s payment is delayed and you have payroll, rental and debts to cover with almost no notice, big banks and traditional lending partners won’t be able to cover you in time – but at GroWise Capital, our unique approach enables us to quickly handle your application and transfer the required funds so you can pay your staff, office rental and more before you incur overdraft fees and interest.

Your own health & wellbeing as a small business owner

If you’re running a small business, you are often the most important person on your team, and the business won’t be able to function without you for more than a day or two. However, unexpected things happen – whether it’s a death in the family, a health emergency or the birth of your child, you need to be able to take some time off when necessary.

The solution

Put a plan in place in the event that you need to take time off work. This will probably involve finding a freelancer or internal employee who can step into your shoes and handle the day-to-day running of your business – but if this is not an option, you need to be able to either close your business (while still paying your staff and office rental) or run at a reduced capacity while you take care of your personal crisis. 

Naturally, this means that your business’s turnover will decrease as well. Again, fast business funding is a great short-term solution, giving you the ability to focus on what matters most – your and your family’s health and wellbeing. In the event of an emergency, GroWise Capital can provide the funding you need with lightning-fast turnaround times, flexible repayment terms and personalised solutions based on your specific needs.

If you’d like to find out how fast funding can save your small business in the event of an unexpected crisis, check out our funding solutions and get in touch with us today to chat to one of our funding experts.

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