Start-ups, growing and small businesses all have the same thing in common – managing cash flow and expenses in the most effective way. Doing this is essential to the long-term success and health of any business to improve opportunities to slowly but surely grow. Nevertheless, it can prove challenging to do this from the outset since focus can be elsewhere due to lack of resources, time, or both. Below, we outline just why expense management is so important to small businesses.
Help with Budgeting
If expenses aren’t properly incorporated into monthly, quarterly, and annual budgets then the numbers will never be truly representative of your business’s financial reality. First, you must have a good understanding of all business operations including seemingly negligible things like staff expenses. A lot of businesses, especially small ones, tend to not pay too much attention to staff expenses (which sometimes make up to 10% of overall budgets) as there’s an assumption that staff won’t spend too much. Additionally, many small businesses still believe that the old-fashioned method of filing and reimbursing receipts is best but that no longer holds true in this digital age. To avoid going over your budget and reimbursing ‘no receipt’ claims (annoying and inevitable) a better system should be adopted. The market has plenty to offer in this area and it’s a good idea to look into businesses offering expense management platforms like Rydoo, that allow for dynamic, real-time expense management that’s bound to help with budgeting and keeping staff accountable. Successful budgeting leads to healthy business growth.
Develop a Great Business Plan
Once a budget has been set in place, it’s good practice to create or adjust your business plan to match and support the new budget standards. Consider what percentage of profits will need to be reinvested, what equipment needs to be purchased or updated, and, maybe, changes you would like to make to your marketing approach. By listing all these things in your business plan, even the items that seem quite insignificant, you’ll be able to get a rounded picture of your business’s future and financial health by helping to focus your spending. Even the smallest of businesses can benefit from having a macro plan to reference at times of uncertainty; this will also provide a competitive advantage as too many small businesses operate on a month-to-month or quarter-to-quarter approach with a focus on survival rather than long-term growth. Expenses, if left unattended, tend to grow but planning and good expense management can help your business to keep on top of it.
Plan for the Unexpected
The business world is an unpredictable one thanks to continuous economic uncertainty and that’s why small businesses must manage expenses with precision should unforeseen circumstances strike. All businesses concerned with survival and growth must have a ‘rainy day’ fund in place to cover any market fluctuations, natural disasters or unexpected events. There are varying ways to protect your business from risk that don’t involve simply having a lump sum saved up but, again, it’s important to consciously manage and mitigate risk with financial and expense management ensuring that you’re not caught short.
Good expense management, from employee spending through to emergency funds, is essential for small businesses as it helps business owners to have a clear outlook on all operations that will contribute positively to budgeting, growth, and being prepared for the unexpected.