Expenditure is an unavoidable part of business; you have to spend money to make money. Of course, if you can get away with spending less then you should, unless you’re jeopardising quality.
It’s a delicate art, balancing income and outgoings. On one hand you want to keep your bottom line as low as possible, but on the other without the stock and resources to fulfil potential demand you run the risk of missing out on opportunity.
Here are three things you need to know about balancing business expenditure.
Have an up to the minute overview
Probably the most obvious but most important point to make, is that you need to have an up to date and accurate view of your income and outgoings. A lot of these costs will not change so can be factored in as your baseline, things like rent, salaries and insurance for example. However, others will change depending on demand, and that’s why keeping a close eye on inventory is essential.
Modern Point of Sale systems offer business’ a quick and easy way to make sure this data is updated after every sale made. They also offer up a serious amount of useful sales data which can be used to support other areas of your business, for example audience insight to serve into your marketing strategies.
Control employee expenses
Employee expenses are a common occurrence within business in 2020. The modern employee is expected to travel the width and breadth of the country for meetings and their travel, accommodation and subsistence costs are rightly covered by the business.
Whilst the vast majority of employees can be trusted to use the expenses system in a responsible manner, there are always going to exceptions which can deliver a nasty sting to when unexpected and leave managers in a difficult position. This is why its important to put in place clear guidelines and caps on out of office spending.
Departmental expenditure control should not just be limited here. Training, entertainment and award budgets should also have clear limits in order to accurately account for these in your financial planning.
All these costs serve an important purpose and knowing a maximum amount that these activities will add up to allows you to factor them in and secure their place within the yearly budget.
Spend sensibly
Without investing in new or existing channels, your business will not grow and eventually stagnate. But choosing exactly which areas are right for investment can be tricky and will be different depending on the type of business and their specialities.
Customer data and marketing insights often hold the key to opportunities. By understanding these and using them in the right way, several sensible areas of investment will reveal themselves.
Once these have been identified, all that’s left to do is businesses calculate just how much money you’re happy putting into this venture. Again, stay sensible, only spend what you can afford and that you’re happy to lose. Expanding into new territories can be a bit of a gamble so spending large sums off the bat is a risky strategy.
