Where’s the Money Going? Spotting and Stopping Cash and Profit Leaks in Your Business
Where’s the Money Going?
Spotting and Stopping Cash and Profit Leaks in Your Business
Running a business is tough enough without your hard-earned money quietly slipping through the cracks. But that’s exactly what happens when your business has cash or profit leakages—and most businesses don’t even realise it’s happening until the damage is done.
This article is here to help you understand where those leaks might be happening in your business, what they look like, and what you can do to plug them—before they turn into bigger problems.
What Are Cash and Profit Leaks?
Think of cash leakage as money leaving your business when it doesn’t have to. It might not show up on your profit and loss statement, but it’s there—in delayed payments, missed discounts, or poor planning.
Profit leakage is a bit different. It’s money you should be earning, but aren’t. That could be from undercharging clients, working inefficiently, or letting costs creep up without realising.
The good news? These leaks are fixable—if you know what to look for.
Common Places Cash Leaks Happen
Late Paying Customers (Aged Debtors)
Ever chased a customer for payment weeks after the job’s done? You’re not alone. The longer people take to pay, the more strain it puts on your cash flow.
What to do:
Keep a close eye on your Debtor Days—this tells you the average time it takes to get paid. The longer it is, the bigger the risk.
Too Much Stock Sitting Around
Stock that’s just sitting on your shelves isn’t earning you money—it’s tying it up. Worse still, it could become obsolete or go off.
What to do:
Use your Inventory Turnover to see how quickly stock is selling. If it’s not moving, consider discounts or bundling to shift it and free up cash.
Subscriptions and Services You Don’t Use
We’ve all signed up for tools or services and then stopped using them. But they keep quietly charging you every month.
What to do:
Do a quick audit every quarter. Cancel what you’re not using and switch to better-value options if you can.
Overpaying Suppliers
If you’re not reviewing supplier costs or terms regularly, you could be paying more than you need to—or missing out on early payment discounts.
What to do:
Negotiate when you can, and track your Creditor Days (how long you take to pay). Try to find a balance that keeps your cash healthy and your suppliers happy.
Slow or Inefficient Processes
Manual processes, unnecessary admin, or duplicated work can cost time and money without you noticing.
What to do:
Use tools (like Jazoodle!) to spot where time and money are being wasted. Look at your Cash Conversion Cycle—the time it takes to turn your spending into incoming cash.
What About Profit Leaks?
Profit leaks aren’t always obvious—but they’re costing you. Here are some common culprits:
Charging Too Little
If you’re underpricing your services just to win work, your profit margins will suffer.
What to do:
Check your Gross Profit Margin (revenue minus direct costs). If it’s dropping, your pricing—or your costs—might need a review.
Extra Work You’re Not Charging For
It’s easy to let small extras slide—extra emails, extra hours, extra revisions. But they add up fast.
What to do:
Make sure your scopes and contracts are clear. If you do extra work, charge fairly for it.
High Cost to Win New Customers
If it costs more to get a customer than they’re worth, you’re losing out. Simple as that.
What to do:
Compare your Customer Acquisition Cost (CAC) with the value they bring over time. If the math doesn’t work, it’s time to rethink your marketing or pricing.
Team Doing Double Duty
If your team is bogged down with manual work or repeating tasks, it’s not just time that’s wasted—it’s profit too.
What to do:
Look at your Revenue Per Employee. If it’s dropping, your systems (or staffing plan) might need a tune-up.
The KPIs That Help You Spot Leaks
Here are a few key numbers that every business owner should be tracking. These give you a clear picture of your financial health and where the leaks might be happening:
| KPI | What It Means | Why It Matters |
|---|---|---|
| Cash Runway | How long your cash will last if nothing changes. | Helps you plan ahead and stay calm. |
| Debtor Days | How quickly you get paid. | Long delays hurt your cash flow. |
| Gross Profit Margin | What’s left after direct costs. | Helps you check pricing and cost control. |
| Net Profit Margin | Final profit after all costs. | Shows the true health of your business. |
| Cash Conversion Cycle | Time to turn spending into cash. | Long cycles = cash stuck in limbo. |
| Operating Expense Ratio | Overhead costs as a % of income. | Higher = lower flexibility. |
Jazoodle makes tracking all these KPIs easy—with dashboards that show your business performance in plain English. You’ll know what’s working, what’s not, and what to fix.
5 Easy Ways to Start Plugging Leaks Today
Look at Your Cash Flow
Don’t wait until year-end. Track where money is coming in and going out each month.Review All Costs
Small, forgotten expenses can snowball. Trim the fat.Chase Invoices Quickly
Automate reminders. Make it easy for customers to pay you faster.Review Your Prices
Don’t compete on being the cheapest. Compete on being valuable.Use Simple Tools to Track KPIs
Jazoodle gives you a clear snapshot of your financial health—no spreadsheets needed.
Final Thoughts
You work hard for your money. Don’t let it trickle away unnoticed.
Fixing leaks doesn’t mean cutting corners—it means being smart, aware, and in control. At Jazoodle, we help you do just that by making your numbers easy to see, understand, and act on.
Let’s stop the leaks together—and build a more profitable, predictable future.
With Jazoodle, you can see where your business stands today—and where it’s heading tomorrow. It’s time to take control of your financial future.
