In any start-up, finances can be tight, therefore it is imperative when you are starting a business that you determine the areas where you are overspending and tackle this expenditure immediately.
Discover the three main areas where small businesses overspend in the previous post First, let us determine the reasons why you might be overspending:
• No proper planning: Set your targets clearly for the year for both you and your staff. If you do not have a proper plan in place and are spending as and when needs arise then it’s very likely that you are overspending.
• Do you have the right vendors: Your business is dependent on the products and services of others. If your vendors are used to servicing big companies and are charging you the same rates, then you are being overcharged. Do your research and find services that make the right economic sense for your business.
• No Financial Mentor: A mentor, especially ones with financial expertise will help your company grow and cut expenditure. A financial mentor will also help you allocate your resources optimally by suggesting tax-saving strategies, providing inputs on how to raise capital and reviewing your financial statements.
How to Tackle Overspending There are simple business ideas that will help you tackle overspending, this will help you keep start-up costs low.
1. Get a Clear Idea of your expenditure: While planning your finances, take the time to tally your monthly average expenditure. Focus on the months that are higher and lower than the average and delve into what caused these shifts. If you are shocked by your monthly expenditure, don’t panic, instead, break down the figures and determine what is essential expenditure and what are be avoided.
2. Implement a monthly budget: After assessing your spending, determine what figure should be allocated to what spending. Ensure that you create a budget that is financially sound but is also achievable. Educate your staff about the budget and the areas where you would like to cut expenditure so that they will make financial decisions with respect to your business accordingly.
3. Schedule a monthly meeting with your accountant: If finance is not your cup of tea, then enlist the experts like your accountant who will be able to crunch the numbers and let you know the true situation of your expenditure. If you foresee a big expense, then discuss it with your accountant and find the best way to raise funds to meet this spending.
4. Track your daily expenditure: Sometimes, it is not the big purchases but the smaller day-to-day expenses that add up and spell trouble for your business. A way to avoid this is by providing a centralized person or software that tracks your expenditure in real-time.
You could install spending software on each of your employees’ phones or computers that make the entry of expenditure simple or you could appoint a single person to oversee daily finances to allow them to supervise the expenditure.
Follow these guidelines and you will be able to cut expenditure or reallocate resources to the spending that will grow your business in the long run.