Finance Your Business
5 habits that keep business spending in control
Follow these money-saving tips to stay on track
Good expense management is a constant balancing act between spending and saving. Rein in costs, and you can avoid cash crunches. But skimp too much, and you hinder growth. To strike the right middle ground, practice these habits:
1. Take a vow of simplicity
Business growth requires spending. But it's important to root out unnecessary costs. "Before you make a purchase, ask yourself if you really need it," advises management guru Jean Wilson Murray, author of "15 Secrets for Growing Your Money-Smart Business." For example, retailers should assess whether their store needs to be heavily decorated, or could they create their brand's look with a few simple touches?
When you purchase services, focus on what the business needs, not just what is offered. Rather than paying a developer to build a complicated website with animated graphics, you may be better off with a simple site where customers can easily find the information they need.
2. Hunt for deals on everything
Talk to vendors about volume discounts, even if they are not publicized. However, Murray cautions, don't get carried away and buy things you have no concrete plans to use. For example, buying an annual subscription to a service is usually cheaper than going month-to-month. But it's no savings if you find, after a few months, that it's not being used. This is especially true for young businesses with rapidly-evolving needs.
To assess whether or not a product or service is something you will use, ask for a free sample or a free trial. When in doubt, sleep on it. "I don't buy anything without waiting at least 48 hours," says Murray.
3. Look for expert advice
Tax preparation software and online legal advice can save money, but paying for professional counsel can frequently save more in the long run. A few hours every quarter with a tax advisor to plan for deductions or credits can cut your tax bill. Good legal advice can help with bottom line decisions about structuring contracts or hiring contractors versus full-time employees.
Getting help on particularly complex issues also saves hours of time spent learning about tax regulations and the like. And in a small business, time is money.
4. Make careful spending part of your company culture
Remind your team that thriftiness keeps the business healthy. And that benefits everyone. Create travel and expense policies that explicitly encourage employees to seek low-cost options. A corporate card program can keep expenses in line by allowing you to set individual spending limits.
Employees appreciate low-cost rewards, such as the occasional lunch or day off, just as much as a high-end gift. You might take it further by creating a reward system where employees who find a less expensive solution or great deal get special bonuses.
5. Schedule regular check-ins
Block out time to review business expenses once a month. Most small business accounting software programs present data on expenses as a percentage of income. Analyze where money is going, being sure to dig into details on spending categorized as "miscellaneous." Business owners often find, to their surprise, they have ongoing-expenses for services or products that they no longer use.
A cost-saving mentality can help shore up money, avoiding stressful cash crunches while building funds for expansion opportunities.
Laura Schreier is a Chase contributor who focuses on business issues, particularly banking and finance. She has written for CNBC.com, Banker & Tradesman, the Hartford Business Journal, and others.