Every business owner practices accounting, from solopreneurs collecting payments to startups paying rent on a coworking space. But if a business owner does not have strong bookkeeping skills or team members are not versed in proper budget management, it can be easy to get in hot water. A lot of businesses have failed because of overspending and poor financial decision-making.
Fortuitously, this does not have to appear to you. It is now simpler than ever to manage expenses and establish good accounting practices. Even if you run a business on a budget, follow this guide for smoother and more effective expense management.
1. Invest in small business accounting tools
The first way to enhance your expense management is to look for affordable tools to assist you to balance your books. According to research by Wakefield Research and Concur, 84% of SMBs still count on manual processes to maintain their expenses. Additionally, 69% of SMBs use spreadsheets to handle their budgets and accounting.
There are lots of accounting tools designated to help small businesses—many are free or cheap. You can easily automate invoices, easily record payments, and maintain your cash flow all with one or two basic systems.
Not only will digital or software-based accounting tools make it effortless to manage your expenses (helping you identify waste or missed payments), they will also make it quicker. You can save various hours and headaches each month by not having to flow over a few dozen spreadsheets. This, in turn, saves you money by optimizing your human resources.
2. Train your staff to better track expenses
If you own a small business, then you plausibly work closely with your accountant, reviewing budgets and expenses for various teams. Nonetheless, one of the best methods for saving time and frustration when doing this is to train your team on basic accounting and budget management principles.
Start with your managers and introduce them to your expense-tracking process. If all the managers follow a unified process and pass it down to their team, then you place the accountability on those who are doing the spending. This unified process will also make it easy to audit who’s overspending and decide which items are not necessary.
As a businessman, your job is to estimate the budgetary decisions made by your team, not fill out expense reports for them.
3. Contract an accountant for your small business
You do not have to be an accounting specialist to manage your expenses successfully. There are hundreds of accounting professionals and services willing to help you.
If you are not ready to hire a full-time, in-house accountant, contract an accounting professional to kickoff managing your books. This can assure cleaner books, and it can free up time on your calendar to focus on growing your business.
4. Periodically audit your costs
You’d be astonished how many costs you take for granted or keep paying each month and year without question. Look at this from a personal level: What gym memberships or subscription services do you have that you never use?
The simplest way to save money and better manage your expenses is to look for monthly costs that you simply do not need.
Set up annual or biannual reports of your expenses, and identify costs that you do not need. You can also use this time to audit fixed costs like rent or payments to suppliers, to ensure that you are getting the best value possible for these expenses.
5. Stay on top of your invoices and payments
One of the biggest challenges that small business owners face is staying on top of their invoices and payments. Whether you need to send invoices to clients or make payments on existing bills, it is easy for a few papers to pile up until the number of invoices becomes overwhelming.
When you let your invoices pile up, you put your business at risk. You’ll keep having this wall of debt that you need to keep paying off. Your debt-to-income levels will be off, and you could’ve some months where you’ve significantly less cash flow because you waited to pay.
Delaying invoices also affects your relationships with your contractors. They will start to wonder whether you are reliable and reconsider their working relationship because your company takes too long to pay them. You can stunt your company’s growth by fraying your professional relationships.
6. Prepare for increased costs in the future
Once you’ve implemented a strategic accounting process, you can then look ahead to prepare for higher expenses in the future. Too many SMBs live month-to-month, hoping the cash in the bank will get them through the next few weeks. If you want to run a stable business, then you necessitate planning ahead.
For instance, if you have high-demand seasons and low seasons, you need to budget your marketing appropriately. Allocate more funds to the high-demand seasons, so you maximize your impact. Then pull back during the quiet months when fewer people are expected to buy your products. Taking steps like this will enable you to be successful in the future—better planning means less scrambling.
Your aim should be to move away from the day-to-day accounting operations and start handling big-picture, strategic decisions. Your business needs you to build a path forward to thrive, not just try to survive.
If you don’t stay on top of your expenses and accounting tasks, then they ‘ll overpower you. The best way to run your small business successfully is to build systems that will help you stay organized, efficient, and scalable. Only then will you be ready for whatever financial curveballs the world throws at your business.