Managing everyday business expenses will not only help you regulate finances, but it'll also help your business grow. Here are 5 tips to control spending.
As your business revenue grows, it might be tempting to loosen the reins on spending. There are always things to purchase, such as new technologies, inventory, business décor, staff apparel, equipment and supplies and more.
Still, it’s important to avoid letting your spending get out of control. By sticking to a spending plan that makes sense for your business, you’ll be better able to set aside some cash reserves. That can help you be prepared for potential emergencies or seasons of slower business.
Even when business is booming, it’s wise to keep the bottom line top of mind. To make sure you’re keeping business spending under control, work to develop these five important habits.
1. Streamline Purchasing
If various departments or individuals are making purchases for your business without centralized planning or approval, your business may be buying things in duplicate or beyond what's needed.
To avoid this situation, develop a centralized method of making purchases. For instance, you could require all purchases to be approved by a particular person or department. That would minimize waste and help ensure that no department or individual is purchasing unnecessary items.
2. Create a Budget
Just as you would use a budget to manage personal spending, your business also needs a budget. As the business owner, you or your finance officer should sit down and develop a detailed monthly and annual budget for the business.
Be sure to include all your regular monthly expenses such as rent, payroll and utilities, as well as more irregular expenses such as insurance, employee training, subscriptions and advertising. To simplify the process of developing a business spending plan, you might consider using a budget template such those available on Excel.
3. Review Vendors Regularly
Just because you’ve been purchasing from a particular vendor for many years doesn’t mean they’re providing you with their best price—or that there isn’t another vendor who may provide the same product and service at a lower price.
Take time to review vendors and vendor contracts on an annual or bi-annual basis. When you ask vendors to bid on your business, the process of submitting a new bid will ensure they are providing you with their best price. It will also ensure that they will continue to value your business.
After you’ve secured acceptable pricing from the vendors you want to use, you might consider establishing a list of approved vendors and distributing it to your staff. That way, you can ensure that your employees or departments will purchase only from suppliers who have been vetted or will offer your business a discount.
4. Look for Ways to Cut Costs on Budgeted Expenses
Always take advantage of vendor discounts. For instance, many vendors offer a discount for commercial customers who pay their invoices promptly.
If your vendors aren’t advertising any discounts for paying early or ordering in bulk, take time to ask them for volume discounts. In many cases, if you’re doing a lot of business with a particular supplier, they may be willing to cut your price.
Also, if you or your staff members travel for business, there are always deals to cut costs on travel. Join a travel rewards program and use loyalty points for hotels, airlines and rental cars. If you don’t have time to manage that and find the lowest prices, assign that task to a staff member who enjoys planning travel or seeking discounts.
5. Consider Virtual or Contract Staff
For many small businesses, payroll expenses are the costliest budget item. And there may be options for getting the labor you need at a lower cost. For instance, many workers are interested in flexible schedules such as those offered by part-time or gig work, and hiring part-timers or contractors can be cheaper for your business. Consider hiring staff on a part-time basis or hiring a freelancer or gig worker to help out on a project basis.
If you do hire contractors, make sure they are truly contractors as defined by the IRS. If they actually qualify as employees, it’s illegal to pay them as contractors (without paying payroll taxes or benefits).
In addition, growing numbers of employees are interested in working remotely to better integrate their work responsibilities with the rest of their life responsibilities. For that reason, even if you need to hire full-time employees, you might save money if you allow them to work from home rather than paying for extra office space.
A growing business needs to make purchases to keep growing, but there’s no reason to let spending get out of control. Take time to set these guidelines in place and keep a deliberate eye on your business spending to ensure that your business will be able to continue growing and succeeding even if the boom slows down.