Here’s Your Step-by-Step Guide to Small Business Spend Management
Are you embarking on a freelance career to see you through the economic downturn? Are you starting a small business? Do you already own a business but need to find ways to reduce your operating costs? It’s time to get serious about spend management.
Spend management refers to the way businesses manage their expenses, including equipment, subscriptions, procurement, travel expenses and other incidental expenditures, and it’s just as important for small businesses and sole proprietors as it is for huge corporations. The way you manage your business finances in the day-to-day can have a direct impact on the longevity and success of your enterprise. Fortunately, it’s not hard to overhaul your spend management strategy. Follow these steps to manage your small business spend successfully.
Identify Your Spend Management Problems
If you’re starting from scratch to develop a new spend management policy for your business, great! It’s always easier to start with a clean slate than to dismantle an old, dysfunctional system and start over. But unless you’re still preparing to open your doors, you probably have some existing spend management problems to address.
Some of the most common problems business owners have with spend management include ambiguous expense policies, often because small business owners don’t have any employees who might need to be reimbursed for expenses and then, suddenly, they do — and in all the hustle and bustle of growing a business, clarifying an expense policy fell by the wayside. You might have business bills that fall through the cracks, especially ones that aren’t monthly recurring payments like rent and utilities — and if you’re operating on a razor-thin margin, late-payment penalties can erase it. You might feel like you don’t have time to search for bargains when it comes to procuring supplies and equipment, or you might not have the skills or know-how to negotiate the best contract terms with vendors, especially at first.
Identify your spend management problems and take steps to address them. Develop an expense policy before you need one. Set reminders to help you stay on top of your bills, so you can pay on time every time and eliminate late fees — a record of timely payments will also strengthen your vendor relationships and give you the leverage to negotiate better contract terms.
Separate Business and Personal Spending
It can be tempting to use personal funds to bail out your business, but it’s vital to keep business and personal finances separate. It keeps things nice and clear at tax time, so filing your taxes is faster and easier, and you’re likely to wind up in legal trouble — you could end up putting your personal property on the line if your business is sued and the court determines that you’re not entitled to limited liability protections because you commingled business and personal assets. If nothing else, keeping business and personal finances separate will save you money on bookkeeping and accounting fees and make you more popular with your bookkeeper and accountant, too.
Put in the Work to Get the Bargains
Frugality is a powerful tool to help you manage your business spend. Take the time to search for bargains — buy equipment secondhand, go green to cut utility costs, and mail in those rebate cards. As a small business owner, you already have a lot on your plate, but cutting business costs by seeking out bargains on the equipment you need can mean the difference between success and failure for a small business, especially in the early years. Take advantage of business rewards credit cards to stretch your money further — you can get cash back or travel rewards that can help you cut costs further. Use spend management software to get a bird’s eye view of your spend across categories — this will be especially helpful as your business grows and multiple employees get involved with procurement processes.
Educate Yourself
Many small business owners aren’t financial geniuses, and you don’t need to be the next Warren Buffet to succeed in business — far from it. But some basic business accounting knowledge can’t hurt. Neither can beefing up your negotiation skills. Get some basic business accounting and negotiation skills by taking an intro-level community college class or online class.
Successful spend management could mean the difference between keeping your growing small business in the black and shutting your doors within the first few years, like most small businesses do. Take spend management seriously, and develop a solid spend management strategy before you help your first customer. With every penny saved, you’re that much closer to growing the business of your dreams.
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