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As a small business owner, there’s always a temptation to spend money to establish and grow your business. While investing in growth is important, so is making sure your money is being maximized and your spending is sustainable. This is where spend control can have a big impact within your company.
Below, we’ll share insights and advice so you can implement spend controls with confidence. Keep reading for the top benefits and strategies for small businesses.
What is spend control?
Spend control offers small business owners a way to establish clear guidelines for their professional spending practices so that they can rest easy knowing their money is being used as effectively as possible. The phrase more specifically relates to a set of practices, policies, and technologies that are used to guide spending decisions.
Since you know that investing money in your business is important for growth and expansion, it probably won’t surprise you to learn that tightening your routine spending is also essential. You’ll want to cut unnecessary costs, increase the efficiency of your work, and ensure as much of your money is being put toward things that actually grow your business or improve the customer experience. Spend control helps you do just that.
While many people conflate this practice with cost control, spend control isn’t just about cutting costs. It’s about tapping into your business expenses and ensuring that your money is being strategically optimized to best accommodate your goals and values as a business.
Why should you implement spend control in your business?
Regardless of the industry you work in or the specific resources, products, or services your business provides, having a good understanding of your financial situation and practicing intentional spending will benefit your bottom line and overall impact. Spend control is considered a smart financial practice for all sorts of companies because it allows you to:
- Increase revenue: Spend control involves carefully looking at your cash flow to prioritize the investments that will help your business succeed. This sets your business up for success because that intentional spending will trickle down directly to your bottom line.
- Chart your growth strategically: Seeing which activities and investments are improving your company’s position within your field will allow you to gain a stronger sense of where you could go next and how you should get there. Track your progress and use the insight you gain to propel you further.
- Minimize financial risk: Leaving your spending unchecked leaves you vulnerable to a whole host of financial risks, including inconsistent cash flow, fraud, overpaying or underpaying vendors due to poor organization, and more. Having an effective spend control system in place makes it easier to avoid these problems and grow your business.
4 strategies for spend control within your business
1. Establish clear spending policies
Rather than evaluating and negotiating the validity of each item on your budget, create a holistic spending policy that helps you quickly determine if something is aligned with your business priorities. Put in writing the kinds of spending that are permitted within your company and which purchases fall out of that scope, then share this with all employees with spending privileges. Think of this as an iterative document and revisit it periodically in your first few months—you likely won’t get it right in your first version, and that’s okay.
2. Set spending limits
Now that you know what your spending policies are, try to embed the parameters and limits you’ve established for your company in your purchasing systems or credit cards. Limits can also be set within mobile payment systems if you use them in your business. This will help solidify and make tangible the policies you have established and bring everyone on the same page in practice.
3. Invest in spend management software
Having one place to track and analyze your spending data can make it way easier to affect real change in your business. Spend management software allows you to automate data from other sources, identify duplicate purchases or accounting errors, and generate reports on your spending to help make budgetary decisions. It also allows everyone making purchases within your business to see real-time spending information and stay on the same page.
4. Set time aside to analyze spend data and revise policies
Getting policies in place is the first step, but the work involved in controlling spending is ongoing. Set time aside every quarter or so to review your company’s spending habits and ensure policies are being followed and that they’re still accurately representing your financial priorities. Over time, you may need to revise policies or adjust spend limits to reflect new goals within your business—this is to be expected.
Put spend control into practice today
By implementing these strategies within your business, you’ll be well on your way to growth and increased impact. Be flexible as you establish and implement these new policies, and be prepared to adjust as you use them.
Business finances can be difficult to manage, but the most important thing to do as a business owner is pay close attention to where your money is going and take stock of how that’s impacting your growth. Spend control is an easy and adaptive way to ensure you’re on track to get where you want to be.