5 Reasons Your Business Is Losing Money

Reasons Your Business Is Losing Money

Generating a positive cash flow and steady income poses a challenge; why? Because many business owners spend the majority of their business revenue on expenses. Which then leaves them with only a tiny fraction of money as their profits.

So if you find that your business is constantly losing money and you have no idea why your small business is spending more than it makes, here is 5 reasons why your business is losing money even after several gruelling hours of hard work.

You have lousy account management skills.

One of the many metrics for success is to monitor your business's financial health, as it is the only way you can tell on paper if it can survive more business years to come. And so, a quick and easy way to track if your business is in the pit of bad account management would be not being able to tell how much money is coming in and out of your business's bank accounts.

There is no room to be unorganised, inaccurate accounting; you need to track all your sales and expenses transactions. Sales transactions entail anything you sell to customers; generating and sending invoices falls under this category. And expenses entail internet subscriptions, electricity bills, maintenance bills, etc. When you spend more on expenses, you cause a negative cash flow for your small business.

Also, sometimes you find that you track your expenses, but you are still stuck; this could be because of entries that could put your business in the wrong spot.

You can avoid these errors by regularly closing and reconciling your books, conducting internal audits, and using a professional accountant to keep your business records.

How can Kippa help you in account management: a seamless cashbook function allows you to keep track of all your finances at ease. Making it convenient for you to manage your business’s accounting

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You are in debt, or you have bad debts.

A potential reason that could be making your business lose money could be because you are in debt, and you can’t see profit yet because everything you make is going into paying back what you owe. This essentially means you're losing money because you have made some previous commitments.

If your business is the kind that sells on credit a lot of times, you would realize that you have no money by the end of a business month because you never got paid for your services in the first place.

Kippa also has a debt reminder feature that can help you get paid 3X faster than before. You should give it a try.

You are underselling your products or service

If you can't answer this question, then it means you may not have found a middle ground to pricing your product. For example, if your cost price is more than your selling price, you are at a loss, or less than 40% of your cost price, you may be underselling your products.

But, don't overdo it; because If your prices are too high, fewer people will patronize you. People will view your products as unaffordable and look for other cheap alternatives. Find a price midpoint to sell to your target market without losing profit.

Tip: Look into the market selling price of the product you are selling; this makes it easier for you to decide what percentage you want to sell.

You are paying for the labour that you don't need.

Many small businesses tend to make a mistake by hiring more staff than they need and can afford. That's why you hear things like companies own employees' salaries for months because they do not make enough profit to pay them for doing their jobs.

Therefore, if your business is losing money, this is probably your 13th reason; you have employed more staff than you can afford. Your business isn't making enough profit, so now you are swimming in debts and breaking your business.

A way to solve this problem would be only to employ the amount of staff you can pay. Then, modify and combine tasks to ration the money you have to spend on labour.

Your online presence is nonexistent

Ello! You are too big, Abi?!

It's the 21st century, everyone is online now. If a person wants to buy food right now, the first thing they'll check is to google, "where can I buy Amala and gbegiri". It is as easy as that, and then they would buy from the businesses that they find Online.

If your business has no social media pages or website, it makes it almost hard for businesses to find you; and this could be a reason that stops your business from making maximum profit, as your target market can't comfortably find you in their comfort zones.

Please, if this is your business's reason, hop on to our article to read about tools to help your business grow. Create social media accounts that you regularly update with products you sell; you can engage with customers and do a lot more.

Tip: Encourage your customers to drop product reviews in your comment section. This is a way to boost your business's credibility when potential customers want to buy from you.

Finally, I have the Kippa gospel; It is a product that helps your business realize tremendous growth and good management. Especially if your business falls under losing money, you need a profit and loss management app. Don't look too far; the Kippa cash book and financial reports, respectively, can below you track every penny your business sends or makes. The invoicing feature can help with monitoring sales everything your company sells. The debt feature could also help your business collect any money that your business is owed 3X faster.

Measure the growth of your business in a click
Measure the growth of your business in a click
Hafeedoh Balogun

Hafeedoh Balogun