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Good, Bad or Inefficient? Not All Expenditure is Equal

Contrary to what most people think, accountants like it when their clients spend money. As long as it’s on things that make a positive contribution to the business.

But spending to plug inefficiencies? Well that’s just a waste. It’s an avoidable expense that could be adding to your profits instead. It’s money you could be investing to grow your business. 

Targeted investment makes businesses better and more resilient. It means you can have smarter systems and tools that help people do a more effective job, spend less time on low-value tasks and make customers happier.

The frustration is that so many businesses have money to do all of those things. But that money is being consumed relentlessly by inefficiency.

Where Is Your Waste?

When we look at a set of accounts for a new client certain expenses sometimes leap out. They are way more than we would expect for a business of that size and type.

The anomaly might be down to how costs have been allocated historically (attention to detail when you input expenditure really does help you make sense of it all later). 

Sometimes there are sound and logical reasons for a business to spend more in some areas. More often it’s the lack of a clear benchmark or somebody having the time or detailed data to ask the right questions.

Other times the issues are more general and affect every part of the business. Inefficiency comes in many forms and lots of small numbers add up to a big one. Here are a few of the main issues we see:

  • Poorly designed workflows that result in delays and duplicated tasks.
  • Outdated systems that make it hard for people to communicate or find critical information.
  • Doing things manually that could be automated.
  • Lack of effective time recording.
  • Buying things you don’t need and carrying excess stock.
  • Buying equipment that should be leased, or vice versa.
  • Doing things in-house that could be outsourced more cost-effectively.
  • Not shopping around for the best utilities deals or supplier terms.
  • Time and money spent rectifying avoidable mistakes and quality issues.

It All Starts With the Numbers

If you’d prefer to stop funding inefficiency and start building a better business, getting your finances under control and having the detail you need is the essential first step.

Make your numbers make sense. Contact Rosy Jeffery Chartered Accountants on 01297 639 457.

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