6 Tips to Manage Your Business Expenses More Effectively
As a small business owner, you already fully understand the value of saving money. You also recognise the importance of reducing costs and maximising your spending power. In today’s cutthroat market, every penny counts toward your ongoing success.
Managing costs across the board often seems like an immense challenge to any small business owner. In many cases, your costs and spending stack up incrementally like a big stack of dirty dishes. Over time, the stack becomes more difficult to manage – or too overwhelming to manage.
Rather than set yourself up for disaster down the road, why not build your business up with a solid foundation? Use these 6 tips to see how you can better manage your small business finances and keep yourself moving toward even better moneymaking potential.
1) Consolidate purchases
You’ve probably seen countless promotions in various stores and retail outlets with these types of promotions:
- Buy [X] Number of Items and Get a Bigger Discount
- Save [X]% After You Spend [Y]
The reason a business offers you savings when you buy in bulk is because they’re getting more of your business overall.
This is the strategy you need to take with your spending: bundle together purchases to save more money. Remember, these vendors want your business, so don’t forget the power you have in this bundling process. In the end, consolidating purchases together into one larger order can lead to major savings in your business.
2) Keep your records accurate from the start
Your financial and business records are essential to your ongoing operations. This is more than just ‘good business sense;’ it’s the law here in Australia. According to the Australian Taxation Office, you need to keep records of all your business transactions for at least five years under either of the following conditions (whichever comes last):
- Five Years After Records Are Obtained or Prepared
- Five Years After a Transaction Is Completed
There’s no question, then, that you need to have a solid organisational plan from the start. Otherwise, you need to start getting organised immediately.
As the ATO page on record keeping continues, you’ll need to have all of the following saved and accessible:
- Sales/Expense Invoices and Receipts
- Bank Account Statements, Deposits, and Cheque Stubs
- All Credit Card Statements
- Receipt Tape or Other Daily Transaction Details
- Essential Employee Data Such as TFNs, Wages, Hours Worked, and Wages Paid
If you’re still a little unsure about what to keep in your records, you can use the ATO’s Record Keeping Evaluation Tool as a checkup. This tool will help you better understand what you’re doing right and what you may need to improve to ensure your records are on-point.
If you’re looking for a simpler way to keep all these records unified and well-organised, you can also look into an accounting platform that integrates within your business’s operations. Some of the best accounting management tools come thanks to current technological innovations and software platforms. In fact, this tip leads right into the next tip…
3) Embrace and utilise technology wherever possible
When implemented properly, technological innovations can lead to major improvements in your business’s money management and savings. A few examples of where and how technology can save you money include the following:
- Integrated Accounting/Business Platform: An online accounting platform such as Reckon One can makes it easy for you to manage all your finances in one easy-to-use solution. Even better, many of these options include integration for staffing, reports, and other business components.
- Cloud-Based Services: Utilising the cloud means you don’t have to continually pay for hardware upgrades, servers, and related costs.
- Upgraded Hardware or Equipment: Depending on your business, investing in newer or better equipment will help you reduce daily expenses. For instance, installing new energy efficient refrigerators in a restaurant will keep your annual energy costs lower.
4) Work with financial experts and accountants
If you’re not a mechanic and your car or truck breaks down, what do you do? Do you attempt to repair it yourself with your limited knowledge and understanding of auto repair? Of course not! You take your car to a mechanic who knows exactly how to get your vehicle up and running.
This same principle should be applied to your finances. A lot of small business owners believe they can handle all their accounting and finances (and taxes) on their own. However, many of those owners also know very little about how to properly manage their financials. This could put you at a much greater risk for missing something, losing money, or even messing up your taxes.
If you’re not comfortable or confident in your business finances, it’s time to work with a professional accountant or financial manager. Sure, you’ll pay the extra money to have this type of expertise. But in the end, you’ll be thankful that you relied on an expert for arguably the most important aspect of your business operations.
To make it even easier for you, check out this Find an Accountant/Bookkeeper Tool for a simple and straightforward search.
5) Regularly review and adjust your business plan
Your business plan is the brains of your operation. If your financial management is the heart that keeps your business flowing, your plan is the reason you’re doing things in the first place. Because of this, you want to make sure your business plan remains “right and tight” toward all your objectives.
Businesses – especially small businesses – will grow, evolve, and change over time. You need to swim a little bit to stay afloat in this global economy. Because your business may change, your business plan will also need to change to keep up. Otherwise, you’ll find yourself experiencing a disparity between your goals and reality.
So when exactly should you take the time to review your plan? Here are a few examples:
- When Something in Your Business Changes: If you add a new service, remove products, or change in other ways, you should take a look at your current plan and adjust as necessary.
- When Revenue Decreases or Costs Increase: Any time you notice changes in your revenue stream or overall operating costs, take another look at your plan.
- When You Don’t Meet Projected Earnings: If you’re falling short on your projections, you may need to tweak your plan to better reflect your business and the market.
- If You’re Behind Schedule: If projects are regularly falling behind or you’re not hitting deadlines, this often indicates a problem which you will need to address.
- Increased Employee Turnover or Lowered Morale: If your employee satisfaction is slumped or you’re losing key players, it’s time to reevaluate.
- Technological Changes: Regularly review your business to ensure you’re not falling behind the technology curve.
6) Train and educate your staff
Finally, you also want your staff to be as cost-conscious you are. Even if you have an efficient plan meticulously followed by you, what value does it have if nobody else in your business follows it?
You’ll want to keep your staff trained on how to do their jobs as efficiently as possible. Take the time to assess where you may be losing money and develop strategies to reduce excess spending. From there, make sure this is clearly communicated to your employees. Just a few minutes of training can help your business save a lot of money in the long run.
A Few Small Adjustments for Major Change
The thought of getting your business expenses in order may seem like an overwhelming task at first. But when you break the task up into small changes like the ones listed above, you’ll see how you can make some major money-saving changes.
Always remember to take the time to reflect about your business. It’s this type of reflection that can help you recognise where you can save money and enjoy even greater success.