Operations vs finance: The profit drain you're missing

If you’re a small business owner, you likely keep a close eye on your finances – tracking expenses, chasing invoices, and reviewing profit margins. But what if the biggest leaks in your profitability aren’t in your spreadsheets at all? What if they’re hiding in plain sight, in the day-to-day operations of your business? The truth is, finance and operations are deeply intertwined, and overlooking this link could be costing you more than you realise. Let’s uncover where these profit leaks happen and how to plug them.  

The overlooked link: Where operations and finance collide  

Many business owners treat finance and operations as separate functions. Finance handles the numbers; operations handle the work. But inefficiencies in operations – like wasted materials, slow processes, or poor inventory management – directly hit your bottom line. Every delay, every overstocked item, and every underutilised employee quietly erodes your profits.  

Common profit leaks in operations:  

1. Excess inventory: Stock sitting idle ties up cash and incurs storage costs.  
2. Inefficient processes: Time wasted on manual tasks or rework adds unnecessary labour costs.  
3. Poor supplier terms: Paying too much or too late strains cash flow.  
4. Underpriced services: If operational costs aren’t accurately factored into pricing, profit margins shrink.  

How to bridge the gap:  

• Track operational metrics: Measure things like production time, waste, and inventory turnover. These numbers tell a financial story.  
• Collaborate across teams: Ensure your operations and finance teams (or you, if you’re a solopreneur) regularly review how processes impact costs.  
• Invest in efficiency: Sometimes spending upfront on better software or training saves far more in the long run.  

Profitability isn’t just about cutting costs – it’s about smart operations. By aligning how you work with how you earn, you can stop the leaks and keep more money in your business.  

By staying proactive, you can avoid costly penalties, legal issues, and business disruptions.