Editor’s note: This article was first published in January 2012. Its card terminal rental terms, the “200 search engines” sales pitch and the remark that large companies were only starting to adopt virtual meetings reflect that time.
Any entrepreneur who has started a business, just like any business owner who has been running a company for a while, will have noticed something: every month, on top of the usual payments and taxes, a small business leaks money through micro-payments. We are also victims of micro-expenses that we rarely stop to think about. These small amounts (which can be avoided) add up over the year to quite a substantial sum.
You could say we’re being ripped off. What are the main ways a business or company gets ripped off?
1. Card terminals and credit cards
The bank isn’t holding a gun to our head to make us sign up for a card terminal (known in Spain as a TPV) so customers can pay for their purchases by credit card. But a small business rarely knows the real terms of these transactions, and many small businesses lose money on credit card payments.
The solution is to study and analyse how many “credit card” transactions we handle, so we know what deal to aim for with the bank, or simply whether a card terminal is really worth having. Let’s take an example:
Imagine we pay 20 euros a month to rent a card terminal. Over the year that comes to 240 euros. Some businesses use the terminal 2 or 3 times a month. Was renting the terminal worth it for those transactions? Other businesses aren’t really clear about the cost of each electronic transaction. In other words, they don’t know how much the bank charges them every time a customer pays by card, and that’s why their profit margin is sometimes eaten up by the transaction “tax”. You have to work it out.
2. Extended warranties
When you go out to buy new computers, laptops, paper shredders, printers and so on, who doesn’t like the peace of mind of being covered for longer for a small extra payment? A two-year warranty, and if you pay 15 euros more, you’re covered for 3 years.
The problem, and it’s almost ironic, is that I don’t know how they manage to make a product last exactly as long as the standard or extended warranty. Rest assured, a computer or printer won’t break down until the warranty period is over. A product rarely breaks down while it’s still under warranty (there are always exceptions). Other times, the extended warranty doesn’t cover replacement parts, which, as luck would have it, is the most common fault once a “device” has been around for a while.
3. Hiring an SEO/SEM expert
Ever since we’ve all been able to sell ourselves online, the word “expert” seems to have lost its value: we come across CVs longer than the Bible. Everyone is an expert. A small business needs to be online, it needs a website, and that website needs to rank well in search engines. So the owner has to turn to an SEO/SEM specialist, a professional who takes care of improving its search engine ranking.
The problem is that it’s the perfect niche for any fraud to slip in, posing as an expert or using techniques of dubious effectiveness. We all know that search engine positioning takes time, and that’s why, by the time a small business realizes it has hired a “scammer”, he has already collected a few monthly fees that have cost us money.
There are still companies that will sell you inclusion in more than 200 search engines, and that’s great, but how many search engines do you actually know? Those are the ones where you need to rank well.
Let me be clear that there are some very good professionals in search engine positioning, but for every good one, you’ll find 15 frauds or incompetents.
This also goes for the people who manage our small business’s brand on social media, because few of them are honest about it: it’s very easy to get thousands of followers for the ZARA brand, but very hard to get a few hundred for “REOTEO cleaning services”.
4. Employee expense policy
The money a company loses through employees’ false expense claims could be described as incalculable. I once heard a manager say that he already takes it for granted that each sales rep adds 2 or 3 euros to the price of lunch, and that, well… it was no big deal. In other words, a company with more than 50 sales reps had a manager who, off the top of his head, didn’t mind an extra cost of 1,800 euros a year.
The problem goes further, because the fraud isn’t only in meals but also in lunches with clients and in fuel. If you know someone who works at a petrol station, ask them how many times they’ve been told: “Give me 30 euros’ worth of petrol and make out the receipt for 40.” A poorly supervised, unscrupulous sales rep can end up making an extra 260 euros a month by “scamming” their company on expenses, not counting personal calls on the company phone, using the company car for personal errands, and so on.
The solution to this very real problem is quite simple. First, meet with your employees and explain the expense policy clearly, making it plain that if they’re ever caught fiddling an expense receipt, they’ll be out on the street. Second, a company card for expenses. It’s a measure widely adopted in the United States that still isn’t used in Spain, even though it’s an excellent way to force employees to be more honest (although they usually find a way around it too). Surround yourself with the most honest team you can and you’ll save yourself a few headaches.
5. Unnecessary travel expenses
Those national department meetings… are they really necessary with today’s technology? Large companies are getting used to virtual meetings, because they save on travel, per diems and some of the extra expenses we talked about in point 4.
As I said at the start, these are micro-expenses that, added together, can create an enormous hole in a company’s accounts.
Featured image: Basile Morin, CC BY-SA 4.0, via Wikimedia Commons.
