Watch Out for Those “Quiet Creep” Expenses That Slowly Sneak Up on You

Recently, our internal bookkeeper noticed something unusual: the cost of one of our software subscriptions had gone up significantly and unexpectedly. Apparently we had exceeded the monthly user cap and were automatically upgraded to a higher-priced tier.

Except we hadn’t. What really happened is that old user accounts were still being counted as “active users,” even though they were no longer active. 

Instead of just counting the accounts we were using, these old accounts inflated our numbers, so we were paying for a subscription tier we didn’t actually need.

These kinds of “quiet creep” expenses are common (even in our personal lives) as we deal with rising costs and subscriptions we forgot we even had. It got me thinking about the same expense creep patterns we regularly see in the businesses we work with here in New England. They’re subtle, they’re sneaky, and because the changes are often so small, they can easily go unnoticed for months if no one is paying close attention. 

So let’s talk about how to spot and navigate expense creep so you can prevent these pesky expenses from slowly draining your business bank account .

What is “expense creep”?

Do you ever find yourself asking “Why are profits shrinking but revenue is up?” You know you’re bringing in more money than ever, but banking less of it. What’s going on?

One answer is expense creep. That’s what I call those small expenses that add up over time without raising any immediate red flags.

When you first sign up for a new product or service, you do it knowingly. You’re fully aware of it and factor it into the cost of doing business.

Expense creep is different:

• Pricing changes occur without notice, and it’s easy to overlook or ignore, because it’s just small charges here and there, not a big, glaring invoice. 
• It eats into your profit margins without catching your eye
• These small amounts become real money very quickly, because the costs just accumulate in the background while you’re focused on other things.

And it’s hard to see it coming because it’s intentionally made that way. That new update to the “terms & conditions” you haven’t read yet? Price creep is most likely baked right into it under a “right to adjust pricing” clause. 

Examples of expense creep in business

Expense creep is sneaky, so it pays to be on the lookout for it. From our experience, businesses tend to have price creep in one or more of these categories:

1. Subscriptions: Does your business pay for tools like Slack, Microsoft Teams, or Adobe? Monthly subscriptions can add up over time, especially if you aren’t keeping a close eye on how your user count affects pricing.
2. Software tools you aren’t using: Digital tools are indispensable for growing businesses. It can even be fun to set up all of the integrations that make your business run smoothly. But, after a year or two, how many of those add-ons are you actually still using? 
3. “Just-in-case” equipment that you never use: Impulse buys and online purchases can add up: a fancy new coffee maker for the break room or company logo stress balls.. It’s always “just one more thing!,” but those little purchases make a big difference to your bottom line. 
4. Price increases:  With more online service platforms adding AI features to their offerings, baseline prices are increasing — often without much warning or a chance to opt-out.
5. Scope creep: Scope creep is when your clients or customers start expecting more from you, without a corresponding increase in rates. When a project’s scope expands unexpectedly, it can quietly erode your profit margins.
6. Operational inefficiencies: Operational inefficiencies are those little leaks in your business where money falls through the cracks. This can look like manual bookkeeping or data entry, inefficient transport or communication. These can turn into days or hours of work that silently increase your overhead costs.

How expense creep affects your bottom line

When I talk to New England business owners, many of them have experienced the effect of price creep at some point in their journey and come to Harmoney knowing the importance of keeping it in check. Here’s how they describe its effects on their bottom line:

• Business sustainability: When business expenses feel unpredictable, it’s hard to stay on track with your budget and manage your cash flow. And when you can’t clearly see where these extra expenses are coming from, you can’t make long-term goals that will realistically carry and grow your business. 
• Industry leverage: Trying to solve price creep by switching to the cheapest vendor can end up hurting the quality of your services, and it may not even address the real source of the price creep. Vendor changes can have a significant impact on how clients experience your business, so this is not the place to cut corners.
• Cashflow management: Without a confident understanding of how much cash is leaving your business, you are risking your ability to cover overhead costs…that’s a lot of added pressure on top of running your normal business operations! 
• Profit margins: If your revenue isn’t changing, but small expenses are quietly eating at your margins, then what you’re losing is the ability to reinvest into your business. 

We’re not saying that expense creep will always put your business at a major risk, but please don’t let it be the reason your business struggles! These small, easy-to-overlook costs can really add up, so we’ve built systems to flag price creep as we review your financials.

Audit your business expenses today

So what happens when you detect quiet creep expenses hiding in the corner? Here’s how to shine some light on them:

1. Review your financials: Your financial reports tell you everything you need to know about your business (well, almost everything!). Look at your Profit & Loss statements, as well as any bank, licensing, and insurance fees to see how costs have changed over time. Better yet, review your Trailing 12 (T12) report, which shows business performance over the most recent 12 months. A T12 report makes it easier to spot patterns in net income, operating expenses, and the hidden cost creep that can build over time.
2. Revisit your vendor contracts: Have your vendors raised their prices or upgraded you to a higher tier? Don’t worry: your loyalty is your secret weapon. Aim to lock in longer contracts at a better rate.
3. Look for duplicate recurring payments: Have you ever looked at your bank statements and thought, Wait, I paid for that thing twice? Mistakes happen, whether it’s due to a processing error or something in the fine print.
4. Cancel “free” trials: Remember to cancel any software trials before you’re charged for them! Set a notification in your calendar so you don’t forget.

The most important question to ask yourself as you look at your recurring expenses is “What is the ROI for this service?” This will keep you focused on outcomes — rather than just continuing to pay for things because it’s what you should do.

Invest in prevention to avoid surprises

Rooting out scope creep retroactively is all well and good. But what if you could take steps to prevent it from happening in the first place? Try these four strategies:

1. Identify your core operating costs. These are must-have expenses that keep your business running. Know the cost and track it monthly. 
2. Revisit your recent projects. Take a moment to consider how scope creep is actually impacting your revenue. You might find that your current pricing can’t keep up with what your projects actually cost.
3. Set a quarterly and annual Total Expenses goal. This will force you to tighten your spending in order to keep the expense total at or below the set goal. 

How Harmoney helps New England businesses control expenses

Harmoney offers bookkeeping & accounting services for New England business owners to help them stay on top of their finances and make confident, informed decisions about their business. Here’s how our proven systems help businesses prevent expense creep:

• Use modern accounting software that makes it easier to track expenses and compare your numbers
• Code transaction the same way every month so you’re always comparing apples to apples
• Build realistic budgets that account for standard vendor price increases
• Flag unusual changes when “normal” expenses move outside the expected range
• Meet with clients monthly to review financials and compare actual expenses against budget and expectations

Protect your business from eroding margins

Quiet, recurring expenses can sneak up on you — but they don’t have to put the future of your business at risk. 

Protect your business from eroding margins with Harmoney. Whether you need our GleamUP service to clean up messy books, or full-service bookkeeping with proactive support on a monthly basis, we’re ready to help.

Simply fill out our online form and book a call today!