Getting Control of Business Spending
What’s the cost of doing business?
For many businesses, answering that question is harder than it seems. The process for handling expenses varies from one business to the next, and many business owners have less control of expenditures than they’d like. This can lead to wasteful spending and other losses, potential cash flow problems, and a greater administrative burden.
If you want to get a firm grasp on your business finances, create a better spending strategy by focusing on these four priorities:
1. Controlling Spending
During times of economic volatility, controlling your spending is critical to supporting cash flow and keeping your business out of the red. But even during good times, having control of your spending and visibility into expenses is vital to identifying opportunities for cost savings and strengthening your bottom line.
Your business probably has a variety of fixed operating costs, like utility bills and mortgage payments, that are pretty much the same from month to month. Planning and paying for these expenses is simple to factor into your budget.
But discretionary spending and unplanned or emergency needs should also be carefully managed to ensure the expenses are authorized, within budget, and right for your business.
Proper spending control gives your business more visibility into expenses, which helps when creating a small-business budget or business forecast. Increased clarity around business spending can also save your business time on administrative tasks like recordkeeping and tax preparation.
2. The Right Ways to Pay
To choose the best ways to manage your business expenses, consider factors like:
- The size of your business and number of departments/locations
- How many employees make business purchases
- Whether you have employees who travel
If your business pays for many expenses by check, it may be harder to get a clear picture of your available cash at any given time due to the delays from sending checks and waiting for them to clear. Also, the cost of cutting checks tends to be higher than paying vendors electronically.
Consider adopting some of these payment options that make it easier to control and monitor expenses:
- ACH Payments & Online Bill Payments: These offer a faster, more secure alternative to cutting checks. They allow you to complete or schedule payments to vendors and other businesses directly through your online banking platform.
- Business Credit Card: The right business credit card makes it easy to track purchases and monitor the spending of authorized cardholders, and it can provide extra perks for your business such as rewards, purchase protection, and a zero-liability policy for unauthorized purchases. Also, the ability to delay expenses by buying now and paying later can give a boost to your cash flow.
- Business Debit Card: Particularly for self-employed professionals and small businesses that don’t want to rely on credit, a business debit card provides the purchasing convenience of a credit card and makes monitoring your finances as simple as viewing your checking balance online.
If your business relies on check or ACH payments, consider taking advantage of low-cost fraud prevention tools like Positive Pay and ACH Positive Pay. These banking tools match items submitted to your account for payment against check/ACH information you provide to your bank in advance, so you can identify and stop fraudulent transactions.
Likewise, if you have multiple authorized cardholders for your business credit card, you’ll want to set spending limits and restrictions on merchant categories to help prevent improper spending.
3. A Clear, Consistent Process for Your Team
Your business may have many different people involved in business purchases. Having clear guidelines will help everyone save time, avoid confusion, and prevent mistakes.
- Have documented, straightforward purchasing policies and procedures that are tailored to your business. This should cover key points such as permitted expenses, expense limits, the authorization process, and required documentation if seeking a reimbursement.
- Have a clear process for expense reporting and reimbursement, if applicable.
- Know about IRS guidelines regarding reimbursements of business expenses, and seek guidance from your tax advisor if needed.
4. A Cost-Saving Mindset
When you control your spending, you can control your costs. Regularly review your bank and credit card statements to understand where your money’s going, and find ways to pare down expenses without depriving your business of the resources it needs.
Over time, small cost-saving measures like these can really add up:
- Cancel unused or underused services and software subscriptions.
- Lower the cost of office supplies by buying in bulk.
- Go paperless (or almost paperless), and save on energy costs with low-energy upgrades like LED lighting in your office.
- Encourage workers to work remotely to lower your facility costs, if you have a large team.
- Make sure you can rationalize all employee travel and cut back on travel where you can. Virtual meetings are often a good alternative.
- Cut back on employee perks that don’t add significant value for employees or your business (such as buying everyone lunch once a week).
- Scale back your use of maintenance expenses such as cleaning or landscaping services at your business.
Smart Spending Tools From a Trusted Bank
At Ephrata National Bank, we offer local businesses a wide array of business-friendly tools to help them control and streamline their payments, including feature-packed business credit cards and 24/7 payment tools available through ENB online banking. Connect with our business banking team for the options you need to manage your spending better, so you can grow your business faster.