How Do Idle Assets Cost Your Business

Step into your factory.  Just look around.  You have two pieces of machinery installed before one year but still not utilized.  At the corner you see 10 laborers sitting freely.  You pay the full package for meeting emergency shortages.  But they stay free for 10 days a month.  You come out and see the large empty space lying vacant in front of your factory.  You may think that these resources are not used and sitting simply.  But the irony is that they are slowly eating your profit.  Read this post.  Get can get more info here on this.

  1. 1. Idle money lying in account: When you leave huge balance lying in your normal savings or current accounts you incur a loss.  Normally banks offer zero or very low rate of interest to these sums.   Use the surplus funds to pay off loans which you hurriedly got at a high rate of interest.   Suppose if you have surplus cash of say 1000 dollars which you might not require for the next 6 months, invest them in deposit accounts or crypto where yield is more.  If you have multiple business houses, rotate surplus funds to the business where cash is a deficit.  You can avoid borrowings and interest payments using this technique.
  2. Idle space: If you own a large land on which your small factory is located, rent/lease out the idle portion.  You can earn rental income.
  3. Idle machinery: Suppose you have taken a loan for buying machinery and keeping them idle, you would be paying the EMIs to bank still.  There you incur a loss.  Check with people doing similar business.  You can let the machinery out.
  4. Idle employees: Paying a salary to employees and keeping them idle will bring you huge loss.  That is why planning recruitment is essential.  From your business experience identify the peak and slack business periods.  You need more men during the busy days.  If you delay orders stating labor shortage, your customers will turn away.  Hence most business firms end up hiring more people to meet emergencies.  But when the demand is sluggish and 100% capacity is not utilized the excess human resources cause burden.  There are two ways to tackle this problem:
  5. You can hire temporary laborers during peak season.
  6. You can increase the number of shifts
  7. You can work during weekends
  8. You can divert the idle laborers to your other business units which need them.

Besides the above tips, never allow your debtors to retain your money for an unreasonable period.