Your new business is finally up and running, and as you start spending more and more money, from designing your website to building out your team, two words start becoming more and more important: spend management.
And you’re not the only one who should be taking note. If you’re a new entrepreneur, it's difficult to know exactly what to do when it comes to controlling your spend. Whether you're selling goods or services, you will need to make sure all spend is justified and you're never caught out by expenses you weren't prepared for.
During this article we’ll be sharing 5 tips for spend control best practice within small businesses.
Ok, it may not need to be quite love but it will be essential. Developing a financial framework right from the start is a great way to keep track of money coming into and going out of your company. One great template for your financial framework would be:
As your circumstances change, so should your financial framework. Try to work on forecasting in six-month bouts and be realistic. Estimating how much you'll make vs how much you think you'll need to spend to achieve this will need to be plugged into your framework - if the results make sense, keep going. If not, it might be time to get your accountant involved.
The best thing to start with is good accounting software. Platforms like Xero and even Quickbooks can help you digitally track inflows (sales of goods/services) and outflows (accounts payable) for the business. The next step will be to look at tracking every purchase made by every employee within the company and controlling this against budgets and cost account codes. This next level of detail will give you real time visibility on every penny spent so you are never caught by surprise by big bills or become a victim of fraud.
We've found that small businesses are great at managing everything themselves and having one person in charge of all financials - and even all purchases for the company - to begin with. Once the team and the company itself expands however, particularly overseas, discrepancies and blind spots tend to appear.
The main problem with just relying on the accounting software to handle all financial tracking is that this will not happen in real time and automatically. This is where spend as a service software can come in and not only take most of the work away, also helping track all orders in real time - regardless of currency and geography.
Reporting is important
It's tough to know which reports are important when it comes to managing business expenses. Here is a list of the most important ones to get to know inside and out:
Do remember to keep your personal and professional finances separate: don't use a personal credit card for business expenses wherever possible. This makes it so easier to keep track of your company's costs as expenses on personal credit cards or accounts may get missed. It will also keep you on top of any business tax write-offs.
Rule of thumb should be that you should always have enough money in the bank to last you four to six months. This helps you buffer any essential big expenses or dips in sales. Here are three quick tips to manage money should your bank balance dip below the safety line:
Get in full control of your figures
To be a successful entrepreneur it is important to understand the numbers driving your company. Keeping the company running and knowing when to expand and when to pull back is vital to the health of the business. By tracking where your money is going at all times, you can plan for sustainable expansion and minimise the impact of any mistakes.
Looking towards technology to facilitate this will make it easier to plan, forecast, chart and re-invest your company money. By employing technology to do the data tracking, analysis and even offer up financial insights, you can confidently steer your business in the right direction.