Beware of little expenses. A small leak will sink a great ship. – Benjamin Franklin
From startups to SME’s to larger organisations, controlling costs is critical to the success of every business. Even the most robust organisations can be derailed by unexpected overheads. Which is why understanding and tackling these costs is paramount. We outline 6 hidden costs that are damaging your business’s bottom line and advise how you can address them.
1. Exorbitant exchange rates
In today’s globalised economy, companies sending money abroad need to be cognisant of currency fluctuations. This can make a significant difference between being penny wise and pound foolish (or in this case Rand-wise). For most businesses, their local bank is their first port of call when making international money transfers. However, what many don’t realise is that banks often charge higher exchange rates. Companies are losing 1 to 2 percent each month on every transaction, meaning they are losing millions per year by accepting stock standard forex rates.
What to do: Look for cheaper and more efficient ways to send money overseas. Smaller financial services firms like Ela Asset Management offer far more competitive exchange fees, saving you a lot of money on your FX payments. The average SME is charged between 15 and 20 cents on their fx transaction, that’s 1% of their fx value. Ela Asset Management will save the SME 0.75% on every transaction and larger firms 0.5% per transaction (Half of their transaction fees).
2. Abnormally high staff turnover rates
Do you have a high staff turnover? Hiring and firing can be a significant drain on your financial resources, especially when you factor in the high costs of replacement and retraining staff.
What to do: Investing in your staff’s growth, development and happiness should be a core focus for your business. Doing so, is proven to improve both productivity and output. If you have a high volume of staff leaving, you need to conduct an audit on your company culture and values. Encourage candid conversations and should a pattern emerge, you need to act quickly to address this. If you feel like the wrong people are consistently being brought on board, you will also need to reevaluate your recruitment processes.
3. Expensive loan costs
Whether it’s in a personal or professional capacity, how often are we told to ‘Read the fine print? However, an inordinately high rate of business owners neglect to do so when taking out a business loan, often finding themselves surprised with hidden fees that increase the cost of borrowing including application fees, origination fees and late payment fees.
What to do: Apart from the interest rate, business owners need to do their research and understand all costs associated with borrowing to ensure they don’t find themselves overextended when it comes to monthly repayments.
4. Utilising multiple service providers
Having multiple service providers can significantly drive up your day-to-day running costs. It also takes far more time, energy and attention to manage multiple providers, and is very difficult to keep track of all the different balls in the air.
What to do: Consolidate and have all services managed by one service provider. This not only makes sense from a logistical perspective, but will save you significant amounts from a cost perspective. Having one provider also makes it far easier to keep track of the various deliverables.
5. Transaction costs
Moving money costs money. Whether your business makes regular international payments, or simply needs to make a once-off transfer for a major purchase, bank transfer fees can be very costly.
What to do: A specialist provider like Ela Asset Management not only offers better rates when compared with a local bank, but offers greater transparency when it comes to hidden fees. Another major benefit is that cross-border payments can be made far quicker than they can with banks. Banks take up to 5 working days to process the transaction, whereas smaller and more nimble firms can process the transaction within 24 hours.
6. Business travel expenses
Although not much travelling is being done right now due to the COVID-19 pandemic, sending your staff overseas can be a costly exercise. Especially if they are using the company card and swiping for every transaction and incurring significant transaction fees.
What to do: Another key service offering from Ela Asset Management is a travel business card. Clients or individuals are able to use these cards at no additional cost when they travel, saving the business a lot of money in the long run. Businesses should explore foreign VAT reclaim on past overseas travel. Corporates are able to claim back from most countries in Europe, Australia, South Korea and Canada based on reciprocity laws.
Unexpected costs will always be part and parcel of running a business. As a business owner, you not only need to be prepared for hidden costs, but constantly need to find ways to protect your business against their adverse impact on your bottom line.