Your new business started with such a simple yet effective idea.
Now that you’ve had some success, you’re starting to see that things aren’t as simple as you thought they’d be. Your product is sailing off the shelves, but you can’t seem to climb out of the break-even stage.
No matter the accounting software you use, your overhead costs may be throwing you and your business off balance. This is a slight issue, but it’s one that can be easily fixed. That’s why we’ve written this article, after all.
What Are Unstable Overheads?
Your overhead costs are associated with items on your balance sheet that don’t directly make money for your business. They’re necessary expenses in order to keep your company running, however. These expenses can be fixed (like your rent) or variable (your mailing).
Here are some ways that these overhead expenses can affect your business.
Stopping Before You Start.
Your unstable overhead costs can cause issues even before your business gets going. Without taking proper inventory of the costs themselves, you could find yourself in a hole. These costs – as mentioned – are necessary, but sometimes they can leave you further in the red than you anticipated. This makes it difficult to dig out.
Get Bogged Down.
Because of the number of new expenses in your life, the pressure of bills and meeting sales quotas could cause some damage to you, personally. Studies show that psychological and physical issues with owners cost over $125 billion in the United States last year. The last thing you want as a new business owner is to be burnt out right away.
Difficult Accounting Down the Road.
With these unstable overheads, your business needs to be vigilant when it comes to the accounting. However, when you are crushed under the weight of the first two issues that we’ve mentioned, properly accounting for these shifting overhead costs can get difficult and be put off. Maybe you had a model that helped keep things in line before. But if these overheads are truly unstable, chances are that model needs to be adjusted.
How Can You Escape?
Despite all of that doom and gloom, there is hope on the horizon. While you may have started a touch behind, there are ways to get your business’ overheads stabilised once more.
Meticulous Accounting.
We all take for granted that we need to account for the goings on in our businesses. Accounting practices, however, need to be taken seriously even before you sell your first product. It’s crucial that you are aware of every dollar in and out of your business. With overhead costs, this means you need to take note of each fluctuation. Peanut butter costing (spread the cost over everything) or Activity-Based costing (cost each activity accurately) will help you keep everything in line.
Use Accounting Software You Trust.
Accounting software in Australia has been helping bookkeepers since its inception in the 90’s. With everyone using a smartphone now, keeping your books balanced has never been easier. Xero, QuickBooks, and MYOB all have interfaces that are simple to work with and that will ensure accurate and instant bookkeeping. Your unstable overheads can be instantly levelled out with the help of good accounting software.
Scale Slowly.
New business owners love to get things growing as soon as they can. A few positive weeks of sales can have owners seeing a warehouse in no time. Hold on! This is a great way to de-stabilise your overhead costs. If you want to keep your business growing, you have to scale appropriately. Scaling up means a larger warehouse, which means more rent to pay, more employees, etc. If you are still battling overheads, maybe now isn’t the time to scale up your operation.
Get a Handle on Your Overheads.
Unstable overheads can be a pain in the neck, but you are a driven professional.
You aren’t afraid to take them on! With some vigilance on you and your bookkeeper’s part, you can keep your unstable overheads at bay. With those under control, you’ll see your business succeed in no time.
