You most likely have a very specific budget for your personal bank account. Every dollar has a place, and every purchase has a point. But do hold your business spending to the same standard?
It’s easy for small business expenses to add up quickly. If you notice revenues leeching out of your business, and you’re not quite sure why your profits aren’t what they should be, you should take take stock of your spending, making sure that every outgoing penny has a purpose. Here’s how:
- Create spending standards. Different employees may embrace different practices when it comes to your firm’s dollars. But remember: they’re your dollars, so you set the standard for how they’re spent. Find out if certain managers think that the reasonable amount to spend on a bi-weekly team lunch is different than what you do, then consider approving a list of affordable restaurants they’re allowed to choose from, or encourage brown bag or ordered-in lunches. Decide that all business travel (except the rare emergency or special circumstance) must be booked at least a month in advance, a policy that won’t cause much inconvenience but may save you hundreds on every airline seat or train ticket.
- Require budgets from individual departments. Just like a family may have a budget allowance for specific activities, a business should have a budget allowance for each section of the company. This allows your employees to have control over the money they spend, but within limits. At the same time, you can still review everyone’s monthly budgets, so that you can see–and perhaps rule on–the specific breakdown of costs. Even if you’re the only employee, you may still find it useful to segment expenditures by “department,” like like marketing, product development, and rent.
- Eliminate unnecessary monthly payments. It sounds obvious, but repeated costs like magazine subscriptions or organization membership fees can add up quick. Review what you’re paying for and make a decision about which are necessary, and which are frivolous. Every quarter or so, go through your monthly payments and make sure that you’re seeing a return on investment for each subscription. If you’ve subscribed to a business magazine for years but are no longer seeing a benefit, or if your local chamber of commerce isn’t really providing the networking events you’re looking for, don’t be afraid to downsize.
- Find deals. Are you missing out on potential discounts? Next time you’re purchasing office supplies, ask about any available small business discounts. There may be some that aren’t listed, and some retailers may be willing to negotiate on-the-spot markdowns for small businesses, specifically on pricier items. Also look at those items your business uses in spades, like paper or ink. Seek to buy these in bulk and you’ll save long-term.
- Do as much in-house as possible, and cut down on consultants. Although contractors sometimes make sense for your small business, there are times when you may be paying consultants longer than necessary. Take a look at the in-house staff you’re already paying and decide if certain services, from accounting to design, could be accomplished in-house instead. If you have a very motivational employee, ask them to take a team off-site instead of paying a fancy retreat leader. If you have a large enough office, host the Christmas party right in your main space, instead of paying for a catering service or restaurant. If you have few legal needs throughout the course of the year, you probably don’t need the priciest lawyer on the block—shop around and find one that fits your budget needs.
Just like revenue, business spending has a direct effect on your bottom line. Make sure you know where your money’s going. The incentive? The more you save, the more ends up in your pocket.