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For a small business, revenue is everything. And without a proper expense management system, costs can spiral out of your control and you can start losing money to unknown hidden expenditures.
Properly managing expenses is not only important for good money and resource management, but it’s also crucial for your business to stay compliant. Now it’s a bit of a repetitive and boring project but with these strategies, you can make it easier, faster, and better!
1- Separate Business Expenses
The first important thing you need to do as a business is to separate your business expenses from your personal ones. You should never be paying your child’s tuition from the same account you use to pay salaries to your employees.
Open a new dedicated business back account for your venture. Having a separate account for business transactions is literally the first step of expense management because you can’t track and manage anything if you don’t know where to look.
A business account also seems more credible when you’re applying for funding. It also makes taxes easier.
2- Set Clear Goals
The next important step is setting goals. You should be very clear on what you’re trying to achieve in a particular time period, e.g., a quarter. Are you looking for better revenue margins? Is cost reduction your major aim? Do you want to cut down the money spent on tools and subscriptions?
Having a clear time-bound end purpose in your mind allows you to reorient your actions accordingly and reallocate resources effectively to achieve that goal. So think about it thoroughly and write it down.
It’s also important to revisit your goals from time to time and see if you’re hitting them or if you want to make adjustments.
3- Lay Out a Detailed Budget
Setting a monthly budget is like establishing your financial boundaries. For you to have a solid financial base, you should decide what you can spend in a month and where. Know your income and your expenses. Some expenses are fixed like rent and electricity while others are variable like paid marketing.
List down all of your expenses and give each one of them a category. This makes them easier to track. Make a detailed plan of how much you plan to spend on a certain expense in a month and allocate the funds accordingly.
Creating a detailed plan also helps you to forecast any unexpected expenses and plan for them in advance.
4- Use a Paystub Generator for Clear Payroll Records
Payroll management is a detailed and a bit of a messy process. It requires you to do lots of calculations for each employee. You then also need to store the details and keep records. The details that you need to store and track are each employee’s salary, employee deductions and salary deductions.
Since you’re a small business, you might be managing your payroll yourself (which you can learn how to do in an article here). Paystubscity can save you a lot of time and effort by smoothly generating pay stubs for your employees. The magic is that it automatically calculates taxes and net pay and you just have nice clean documents that you can save as records.
5- Set Proper Expense Policies and Approval Process
An expense policy removes all the ambiguity from business expenditure. By setting expense policies, you make it clear what qualifies as a business expenditure or what doesn’t. This helps your employees spend money more mindfully. It also avoids any vague claims or disputes for reimbursement.
There’s also a compliance factor here as the IRS requires the business reimbursements to be deducted from taxable income. So it’s important that you lay out what qualifies as business expenses.
Put in place an approval process as well so you can govern where to spend money and where not to.
6- Track Everything
Track everything. Expenses, employee paychecks, tax deductions, and payments to vendors. What you can’t track, you can’t measure, and what you can’t measure, you can’t control. It’s best that you track and record every inflow and outflow of cash from the first day.
Tracking opens your eyes to the expenses you never thought you’d have and the money you never knew where it was going. You can use a simple notebook to track the expenses or use an app or software for faster digital tracking and less clutter.
7- Monitor and Train Employees
Just you being budget conscious won’t be enough. Your employees need to understand the importance of mindful spending as well. Train them to cut costs and put extra effort in saving bucks wherever possible.
Teach them your expense policies and make it clear that you will only be reimbursing them if they spend according to the business policies and get approval beforehand.
8- Negotiate With Suppliers
Expense management can be done from outside of the business as well. To keep your business profitable, it’s important to have a very good understanding of your market. Keep researching for the best vendors and suppliers and be aware of the prices in your market.
Try to secure long term deals with your suppliers. This can get you discounts and also keep business operations stable.
9- Monitor and Adjust Budgeting
Business needs don’t always stay the same. Sometimes, you need to invest more in marketing, sometimes operations need a little push. It’s better to periodically review your budget and financial plan and adjust it to match your business needs.
Final Words
Managing a small business is like wearing ten hats as one. You can be so busy in operations that you forget tracking your expenses, which translates to losing profits. That’s why it’s so important to put in place an expense management system and teach it to your employees so that it can work for you with as little effort as possible.
An online pay stub generator can be incredibly helpful for you as it generates the payroll documents easily and calculates accurately so you don’t have to worry about accurate employee payments, taxes, and records. That’s one less burden on your shoulder and one step forward towards streamlining your business.
