It kind of depends on how you look at it.
Accountants define an “expense” only as something you pay money for, and it’s easy for your business to adopt this same point of view.
If you measure your balance sheets, most companies will see either Labor or Materials or Infrastructure (Equipment and facilities) topping the list of where the money goes. And seeing where your dollars go is definitely an important thing to understand.
But Accounting Isn’t Everything
A better practice for strategic planning is to also recognize the cost of anything that prevents money from reaching your bottom line, because these may actually be the most ‘expensive’ things your business encounters.
There are many things that cost you that might not show up on any bookkeeper’s list.
- Opportunity Cost – The money you could have made but didn’t because you were doing something else
- Lost Revenue – The money you didn’t make because you didn’t win the job in the bidding and sales phases
- Inefficiency – The combined value of the extra effort it took to do the work you did, plus the opportunity costs of the time you lost doing it inefficiently
- Assumed Risk – If your business is under-insured, or your management practices lead to excessive risk-taking, or you just experience one of those costly mishaps that can happen to anyone… …The risks you assume in business will – statistically at least – catch up in the end.
Our customers can ‘see’ the cost of using our software because it shows up as a charge on their credit cards. It takes a greater understanding for them to see how using Go iLawn or Go iPave makes their money back many times over.
- Offsetting Opportunity Costs – “Having a full sales pipeline is great, but we were overwhelmed with work and struggled to figure out how to get to all of the sites in a timely manner. Go iLawn offered a solid solution and ensured we could assign our staff more efficiently.” – Daniel Currin, Greenscape, Inc.
- Preventing Lost Revenue – “…The ability to create color coded project maps showing the details of all of aspects of the work has assisted us to win more projects.” – Lance Bradshaw, CEO of Sure Seal Pavement Maintenance Inc. Toronto, ON
- Improving upon their Inefficiency – “We have been using Go iPave since 2010. It has become an important tool for us by reducing the time spent on sites measuring asphalt repair areas and for sealcoating…” Lance Bradshaw, CEO of Sure Seal Pavement Maintenance Inc. Toronto, ON
What’s the biggest ‘expense’ for your business? Tell us in the comments.