Where the money leaks

Small businesses rarely lose money in one dramatic place. They lose it in five ordinary ones, each too small to notice on its own and all of them continuous. Knowing where to look is most of the skill.

Stock: what has not moved in six months, what has been written off, what is bought in quantities that suit the supplier rather than you. Waste and rework: the job done twice, the material spoiled, the delivery that went to the wrong place. Unbilled work: the extra half hour given away on every job, the small item never added to the bill, the callback treated as goodwill — usually the largest of the five in a service business and always invisible, because nothing that was never invoiced appears anywhere in the accounts. Discounting: what is actually given away versus what the price list says, which is a number most owners have never totalled. And bad debt, which you can now age properly from ENT-104.

Size each one before forming an opinion, even roughly, because the ranking is almost never what anyone expects. The thing that irritates you most is frequently the fourth largest, and the largest is usually something nobody mentions because it has never had a number attached to it. An hour with a calculator on each of the five is the highest-return hour in this course.