As a business owner, it’s no secret that one of your primary goals is to maximize your profits. To accomplish this, part of your job entails reducing costs when possible. Whether it comes to saving electricity, reducing internal overhead, or paying close attention to your bills, there are many ways to do the necessary and often mundane work of finding and plugging financial leaks in your business.
At the same time, however, there are a few aspects of you business that you never want to cut short , where being cheap may cause more harm than good. Think about building a house: if you want to cut costs, you can use a cheaper coat of paint and leave out the fancy artisan rugs -- but what you don’t want to do is try to save money by neglecting the foundation of the house. Doing so would cause the house to collapse. Likewise, when it comes to running a business, there are situations in which it is helpful to cut costs and save money, and then there are situations where doing so undermines the very foundation of your startup. Here are three areas of expenses where you should never take shortcuts.
Professional accounting isn't just a very important part of any company, but cutting costs here can cause more trouble than doubling down early. Keeping track and monitoring expenses, revenue, all monetary transactions is important not just to improve your bottom line, but also for the inevitable emergencies -- like if your business is audited. You need to be able to provide all documents of sales and transaction, or risk facing huge fines.
In many cases, accounting serves as the guide and roadmap for effective management decisions. It shows leadership what is actually going on in their company. Whether it is to prevent fraud or increase the productivity of your business, operating an effective accounting department is critical for your business.
Of all the areas where you can cut costs in your business, legal is not one of them. Having the proper legal counsel will help keep your company out of trouble, ensuring the safety of your assets and ownership in the worst of times. Being able to depend on a trusted legal professional will allow you to delegate tasks around regulation, corporate structure and more -- freeing up your time to keeping the business growing while making the process free from surprises.
In addition to a highly functioning legal department, business owners should have a will as well as proper life insurance coverage. Life insurance coverage will help a business deal with unexpected expenses or a shocking loss, helping the founder retain his or her legacy as well as the security of his or her family in case of death.
HR is one of the most critical parts of your business -- because the business really is an extension of its people, who are both the company's most valuable assets and the masters of its direction. In many ways, human resources is the glue that holds other departments together. HR will help to ensure that the people who enter your company are well qualified and fit for your business, with room to grow as the company does.
But HR also serves a budget control purpose, preventing excess spending and slimming down work costs. When it comes to training and growing your employees, you want to invest the proper resources: it is the role of HR to help with the onboarding, training, retention, and long-term development of your workers. In addition, if there is ever a conflict in the office, HR will resolve it and ensure that work continues as planned. There are a plethora of necessary functions of HR, which you definitely don’t want to exclude from your budgeting..
Ultimately, while there are many expenses you can afford to slim down, legal, accounting, and HR are three that should remain solid. Where is most of your own budget allocated? Let us know in the discussion.