Minimising expenditure is a critical component of business survival and cash flow. Follow these practical expense management guidelines to help keep your business expenses under control.
Plan your expenditure
When considering any business expenditure, question whether it’s really necessary, and if so, whether you need it now? Will you utilise the item or service as soon as it’s purchased, or can the expenditure be delayed?
This is an example of why it’s useful to have a budget in place for your business. If you’ve already determined your spending limits for the year or quarter, you’ll be able to decide whether a particular expense is warranted much more easily.
If putting together a complete budget for your business is too daunting, at least formulate a plan and time frame for expenditure on major areas of your business.
Assess the return on your investment
What is the return on investment (ROI) of the expenditure? What will it return to the business over a period of time – say a year? Will it lead to income generation? Will it have a resale value? Do you really understand what it will contribute to the business?
With the answers to all these questions in mind, is it worth the money?
If you decide to go ahead with the expenditure, shop around, compare prices, seek quotes, watch the sales, use vouchers and always try to negotiate a better price.
Be accountable for your business spending
As a soloist, are you being held accountable for your spending? Discussing business expenditure with your partner, accountant, business coach, or advisory board on a regular basis can be a valuable business growth strategy, and may help you identify new money saving tips.
If social embarrassment curbs your spending habits, you could even link your Twitter account to Blippy, which tweets the expenditure on your credit card in real time.
Want more articles like this? Check out the financial management section.
Think outside the box
Is there a way you can have the product or service you want without spending the money? Are there borrowing, co-sharing or renting options available?
Like one of my clever clients, you may find it fun to turn money saving into a game, competing against yourself to spend less and less with every passing month. Another client rents an office for his business, and then sublets the space he doesn’t need at a rate that more than covers his own rent.
It may seem exhausting and onerous to apply these expense management guidelines to every purchase, but it is essential to understand that unnecessary expenditure could lead to cash flow problems. I have firsthand experience of watching businesses misguidedly outlay huge expenses early in their operation, only to teeter on the brink of collapse for months or years afterwards. Spending money wisely will enhance the stability and longevity of your business.
Are you a smart spender? If you’ve got any extra expense management tips, please share them with us below.