Many businesses close their doors not only due to low sales. Often, entrepreneurs face dissolution because of mismanaged budgeting, bad accounting, and poor spending habits. Poorly managed resources are a silent business killer that will drain your company and bleed it to death. This is why it is vital to keep a proper record of spending and make sure that your business strives to maximize resources. This means proper bookkeeping, diligent accounting, most of all, spending only on what is necessary to keep operations alive while granting enough allowance for steady growth.
If you have been a victim of poor choices, unneeded expenses, and over expenditure, here is the cure for you! Below are all the tips, tricks, and things you can do in order to cut out bad spending habits that compromise your business. When you follow them, you can build better ones that will sustain your company for the long haul. Remember, every peso saved is a peso earned, so you must be diligent in tracking the flow of your money. Let’s get started.
1. Rate, Rank, and Reevaluate Priorities
Before incurring expenses, it is important to first-rate and rank all these business expenses from most important to least important. Doing so will allow you to set aside an amount for your priorities and prevent you from overspending on things you don’t truly need. Don’t make this business mistake for failing to plan is planning to fail.
Next, it is important to reevaluate every item on the rated and ranked list of expenses, from utilities to supplies, among others. Ask yourself over and over again if:
A) You or your business needs this
B) This item will help you grow and expand your business
C) This item can be substituted for a lesser alternative that will serve the same purpose and is of the same quality
These questions will help re-frame your mindset and allow you to differentiate the “needs” from frivolity… and this leads to the second most important point below.
2. Cut Out Unnecessary Expenses
Usually, it is spending on the wants that get you off track. However, with proper diligence, you can overhaul your budget and make wise spending choices that assure business growth. After creating the list, you must now identify the extremely unnecessary expenses. These things must be cut out, no excuses.
Such examples may be subscriptions that no longer benefit your company and office supplies that are useless and not needed in your company. It may even be in the form of rent expense on an office space or warehouse that is “too big” and not properly utilized. These may be downsized to save your resources as larger workspaces also demand higher maintenance fees.
3. Take Advantage of Deals and Discounts BUT Manage Impulse Buying
In running a business, one way to save on expenses is to avail of bulk discounts as well as premiums that go with certain payment terms. However, it is important to remember that you should only give in to these sales and promos if they are absolutely needed.
Otherwise, giving in to the pressure would be impulse buying. Doing so will do more harm for your company than good. Remember, if you buy a discounted item that you do not need, you do not save money; you waste it. Thus, it is important to make a smart choice when it comes to seeing sales and promos. Work hard on negotiating the best deal with a good supplier.
4. Track Expenses Regularly
The most basic and crucial aspect of creating healthy spending habits is tracking these expenses. It is vital that you note down all expenses in your journal so they can be properly accounted for. Collating all expenses into one account also allows you to get an overview of how much you spend in a period.
From there, you can identify what is inflating the amount you spend and make the necessary changes to keep your business from bleeding money. If you do regular accounting and bookkeeping, you stay on top of your financial health. As a result, you won’t be caught off guard at all. Most of all, having a documentation system means you can readily audit your cashflow, allowing you to make proper forecasts.
5. Create a Payment System
Having a payment system in place that tracks amounts that need to be tendered for specific payment terms will allow you to see the broader scope of your business expenses. This can be in the form of a calendar or a list that displays all the bills and items that need to be paid for, and the date payments need to be made. This will ensure that you observe the habit of promptness and avoid paying penalties, which equates to paying more money.
Moreover, being able to see how much you will need to pay in the coming days will allow you to reign in your unnecessary or extravagant purchases. Besides, it may motivate you to pay before the due date. Some companies even provide incentives for early payments, so it is better to take advantage of that.
The Final Wrap Up
Proper accounting of all your expenses is crucial to the success of your business. Your goods and service may sell like hotcakes, but it will eat your profits if you don’t properly account for expenses. If you need help, give our team a call. We can help you manage your accounting, audit your books, and prep your tax returns. Take advantage of our free 30-minute consultations.