30th December 2020
In order to ensure the financial well-being of your small businesses and strive towards your goals while maximising profitability, it is crucial for all small business wonders to prioritise the careful management of their finances, including expenses. By effectively handling expenses, you not only maintain a clear overview of your financial health but also pave the way for achieving your desired milestones. With this objective in mind, we present a valuable resource: a comprehensive guide to help small business owners navigate the realm of expense management.
What are Business Expenses?
The term “business expense” encompasses all the expenditures associated with the daily operations of a company. These costs include various aspects such as inventory, supplies, services from suppliers, rental fees, utilities, and employee salaries, marketing and advertising, and more. Effectively managing expenses is crucial for ensuring the financial well-being and prosperity of your business.
Effective Planning for Expense Management
Developing a financial strategy for your business aids in effectively managing expenditures. A cash flow plan examines the patterns of your cash flow within a specified timeframe, providing specific dates for anticipated income and expenses. Consequently, it identifies periods of potential cash surplus and potential deficits.
Crafting a cash flow plan can be accomplished through a spreadsheet or by utilising various tools and applications. These resources offer the added advantage of facilitating the exploration of different scenarios, enabling you to access their impact on your overall financial projections more easily.
Track Your Income and Outgoings Effectively
If you have limited expenses, you may find it sufficient to monitor your income and expenditures using basic tools like spreadsheets. However, even for small businesses, this approach can become burdensome and inconvenient, especially for employees on the go.
To simplify matters, it is worth considering an investment in accounting software that includes expense-tracking features. Nowadays, many of these software solutions are cloud-based and offer mobile applications, which greatly facilitate the prompt recording of expenses for both you and your mobile workforce. Additionally, using an accounting package provides a straightforward method for storing receipts, which proves advantageous when it’s time to settle your tax obligations.
When keeping track of your income and expenses, it is crucial to focus on the following key aspects:
- Make sure payments to suppliers are made on time
- Stay on top of your own credit control
- Check that your actual cash flow matches your forecast
Develop a Robust Purchasing Strategy
A robust purchasing strategy should cover the following aspects:
- Always be clear on your purchasing goals
- Research every (significant) purchase
- Have the confidence to negotiate effectively
Use Credit to Reduce or Spread Costs
Unforeseen expenses can frequently disrupt the smooth flow of your cash resources. However, by utilising business financing options, you can effectively manage these costs by spreading them out over a period of three months. This approach helps maintain a consistent cash flow, minimising the impact of unexpected expenses.
Affordable finance can help you reduce costs too and you can use it to…
- Bulk buy to get a discount
- Achieve minimum order thresholds
- Pay in-advance to beat future inflation
- Avoid using other, more expensive forms of credit
- Negotiate better teams with suppliers and keep a good reputation
