June 18, 2014
The costs lurking in the shadows of an organisation are difficult to spot, and a threat to the productivity and ambition of social businesses. Here are 17 hidden costs you that you can cut right now.
1. Unprotected time: Wasted time is one of the most difficult hidden costs to spot, and it can manifest itself in different ways as you’ll see below. As a starting point it’s important to think about the time it takes to do the routine things like filing, managing finances, and answering emails or calls. Sometimes it’s cheaper to pay for experts and support as you doing it yourself doesn’t always result in savings. Consider the time spent on routine jobs and on learning tasks you’re not trained in that could be better spent elsewhere in the business. Bring in the right support, guard your time and teach others to protect theirs so that most of it gets spent on the things that matter.
2. Poisonous contracts: A contract can be an elixir, but it can also turn out to be a poisoned chalice; make sure you can tell them apart. Understanding the true cost of delivering a contract – planning, bidding, delivery, troubleshooting, monitoring and reporting – is key before you set out to reach the pot of gold at the end of it. Know your break-even point so that you assess whether the new contract will cover your costs and is worth pursuing, otherwise you’ll end up subsidising the contract.
3. Bad communication: Tasks and jobs that are not communicated properly can spark a chain reaction of wasted time and resources. Underestimations of how long it will take to complete tasks lead to rushed jobs, or worse, the need to redo tasks that were not done correctly first time. Happily, it’s a money waster that can commonly be fixed by improving internal communication, taking the time to explain things thoroughly and to all of the relevant people.
4. Grumpy employees: The costs of not managing your employees correctly can pile up. It’s important to make sure you’re developing staff skills to keep up with the business. By empowering them to do their job you’re making sure they get the most out of the work and you get the most out of your investment in their time. Employee disengagement is at the root of the costs associated with a high staff turnover, sick leave and poor morale. Having a high staff turnover can lumber you with recruitment and training costs. More importantly, the loss of skills and expertise when an established member of staff leaves is expensive. According to Gallup’s 2013 State of the Global Workplace report, eliminating active disengagement would add more than £50 billion to the U.K economy each year.
5. Unpredictable volunteers: Volunteers are a great way to support teams at full capacity, but they are not a free resource. Capable volunteers with bundles of enthusiasm can and will add a huge amount of value to a social business as long as they are supervised, trained and developed. One of the biggest issues many social enterprises face is a dependence on volunteers who don’t stick around. They then face the costs of losing and looking for new volunteers. Investing the time to manage volunteers and making sure they get value out of the work they are doing is key to maintaining longer-term relationships and a reliable team. Tip: it’s always worth seeking advice and support from volunteer centres to get the most out of volunteers.
6. Utilities and waste: The cost of energy and waste disposal continues to rise and is unlikely to reduce significantly in the future as natural resources become more scarce. For organisations with premises, just running the building is often one of their most significant costs. By making minor changes these costs can be reduced with immediate effect. The big money savers follow, and given the state of the planet, it’s worth researching and seeking advice.
7. Water: Water is a prolific hidden cost sending money trickling down the drain. Water is costly for the environment because it takes large amounts of energy to transport and treat it. That makes wasting water both an unnecessary and undesirable spend for your business. There is a delivery and disposal cost for water, so ensure that taps aren’t left running, there are no leaks on your premises and that you introduce low cost or no cost gadgets and procedures to reduce the amount of water you use.
8. Energy: Energy waste is costing you money and hindering your social and environmental mission. Save energy and money by turning off items that aren’t being used. We regularly find that organisations leave computers on permanently or have the heating on whilst windows are open and radiators are covered by furniture or equipment.
9. Lazy recycling: Recycling is not just good for the environment, it’s also a big money saver. It costs you £80 for every tonne of waste your business produces, plus the cost to transport the waste away. You could reduce the amount you send to landfill by recycling waste, reusing items and more importantly using less by designing resource efficiency into your working practices.
10. Membership fees: It helps to be connected, especially as a new social enterprise. A great way to build your network among peers is to join professional associations relevant to your area of interest and delivery. But you need to be selective as this can mount up.
11. Licences or permits: Do you need a licence or permit to do business? What will it cost and how often will it be renewed? Those that run for periods longer than one year are often forgotten.
12. Legal services: Hopefully your enterprise will never need a lawyer, but think carefully about what legal advice can offer you – good legal advice can save you money, but legal fees can also eat away your profit margin. 13. Credit card fees: If you are selling products and services, credit card fees can get you on the front end as a buyer and on the back end as a seller. Can customers buy your product or service with a credit card? Expect to pay around 3% of total charges in credit card fees, if so. Research can help you determine credit cards that charge the lowest fees, but ultimately you want to make purchasing simple for customers. Find the right balance between fees and customer satisfaction.
14. Mobile phones: A smartphone with all the amenities will cost! Evaluate who needs a mobile and what services they require. Is bulk pricing or shared contract servicing an option? It may save you money!
15. Office space: Paying to rent a space for your small social enterprise can hit your bottom line in a big way. Before deciding where to set up, is a virtual office a possibility, or could you share desk space with other social enterprises?
16. Office tools: The tools you need for your social enterprise to run a service are obvious, but smaller equipment costs can be forgotten in the mix. Remember to include basic office equipment in your budget – items like computers, copier, paper, scanner, desks and chairs. Determine the needs of your small enterprise and compare prices until you find the best deal.
17. Repairs and maintenance: What happens if everything breaks? Reserve a line in your budget for emergency expenses, and think about buying tools that will last.