According to SCORE and a U.S. bank study, 82 percent of businesses fail due to poor financial management. Hence, heeding to profitable strategies and not knowing about the reasons for financial losses is like having a leaking business bucket. So, to help you identify the money leaks, listed below are some significant reasons your business might be facing a financial crisis.

  1. Zero expertise in accounting

It is an undeniable fact that good accounting processes play a significant role in the success of every business. Good accounting helps monitor day-to-day business transactions, track accounts payable and receivable, and prepare accurate financial statements for projections and tax compliance. However, if your company lacks proper record-keeping systems and skilled employees to manage business accounting, you’re probably losing cash from everywhere. You’ll be drowning in lost transactions, excessive liabilities, underpriced assets, and towering expenses without even realizing it

Fortunately, there’s a fix- hire the accountants, duh! Skilled resources with a Bachelor’s and Associate’s degree in accounting can perform most routine accounts and finance-related business tasks. If you want to promote a junior accountant to a senior job role, leverage the internet and get that person enrolled in a distance learning program. An online Master of Accounting should suffice. This way, you’ll be able to overcome your business’s financial ineptness.

  1. Combined business and personal bank accounts

Having a single bank account for your company and personal purposes not only reflects a poor understanding of how a business works, but it’s also downright lazy! As your business grows, its needs grow along the way. Hence, it would be best to maintain two separate bank accounts instead of a shared one. This will allow efficient money management. Also, you won’t end up spending your company’s money on your personal needs and desires. Imagine your private shopping itinerary popping in your bank statements when the IRS reviews your financials for an audit. Oh, did we tell you that they also require you to keep your business and personal account separate? Well, now you know!

  1. Poor time management

They say time is money, and they say so for a good reason! As important as it is for you to make wise financial decisions, it is equally important to make them on time. Consider time wasted as an opportunity to make a good investment gone to waste too. Additionally, timely completion of tasks and deliverables leads to improved operational efficiency and employee productivity. 

Therefore, ditch laborious and dated processes and create workflows that deliver more results in less time. You’ll be saving countless pennies lost in hours’ worth of labor. Employ the latest tech tools and software to make things easier for your workforce.

  1. Unneeded luxury investments

Purchasing necessary software and hardware doesn’t count in squandering your money but opting for magnificent furniture does. If your financial statements report heavy losses, consider looking into the expenses you made to design a luxurious office space.

Your business goal should be to earn sufficient annual income to keep the ball rolling. But if you’re going to burn it all on things that add no value to your business or your customers, you’ll be broke in no time. Hence, spend wisely. Invest in assets and building a brand that customers love. That jacuzzi for the office can wait.  

  1. Frequent recruitment

Frequent hiring is bad for two main reasons. One, it reflects a high turnover rate, which is terrible for your company’s reputation. And second, you lose the money spent on training and development and incur additional expenses to hire replacements. This cost may not be apparent on the financial statement, but before you know it, it will burn a hole through your pocket.

Hence, to reduce the turnover rate, it would be best to create a productive work environment. You can achieve this by designing and implementing employee engagement programs. Try to keep your workforce happy. Create a collaborative working space that is conducive to productivity. Also, it would be nice to pay them on time and give regular bonuses! Encourage open communication, sharing of ideas, and provide ample learning opportunities.

  1. Unresolved shrinkage

If you are selling tangible products, you’re probably familiar with shrinkage, a.k.a loss of merchandise or assets. However, regardless of its various causes, including fraud, employee theft, and administrative errors, you shouldn’t allow it to continue.

You can minimize shrinkage by working on your security policies and keeping a strict eye on your employees. Moreover, you can also invest in the Xero inventory management system to improve the tracking process.

  1. Terrible pricing strategy

This one’s a no-brainer. The way you price your products has a noticeable impact on your business’s bottom line. Again, this trails back to good accounting practices. Suppose you are unable to keep track of your fixed and variable expenses. In that case, you’ll never be able to price your products correctly. Also, you can’t stick to the low-price high-cost business model for too long. Who knows, you might be wasting your brand’s true potential.

It would be wise to follow a strategy that comprises analyzing the market, learning customers’ preferences, and staying vigilant to your competitor’s pricing strategy.


Identifying the possible areas where your business might be losing money is essential to put a plug on the problem. This article mentioned a few common causes. A high turnover rate, poor time management, badly priced products, and a shared bank account can result in substantial, heavy losses. Bad accounting and investments can ultimately drive it into the ground. However, hiring professional accounting experts, deploying technology to automate processes, working a reasonable price for your products are few things that can turn the tables around.