Everything You Need to Know About Spend Management - Sun and Planets Spirituality AYINRIN
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You knew that being a business leader would require skills in people management, decision-making, and creativity, but perhaps you weren’t quite prepared for how much time and energy you would devote to the business budget.
A business cannot operate in the red for long; you need to make a concerted effort to reduce your expenses and increase your revenues, or your business will fail. That means you need to dive deep into your business spend — but what, exactly, does that mean?
“Spend” is a term that encapsulates all of your business expenses, including money your business is losing due to inefficiency. Spend management, also called spend analysis, is the practice of collecting and understanding expenditure data to improve all sorts of business processes.
In particular, spend management is concerned with three crucial questions:
What are You Spending?
Off the top of your head, you can probably list your business’s major expenses and provide a ballpark figure for the cash flowing out. Unfortunately, a rough estimate of your monthly expenses isn’t good enough to keep your business alive, let alone thriving.
Especially when your business is young and vulnerable to minute fluctuations in income, you need to know exactly how much money is flowing out of your accounts. This figure is useful for more than managing business spend. You also need to understand outgoing cash to develop a cash flow statement, which helps you assess your business’s financial health.
What are You Spending It On?
Knowing how much money you’re spending is equally important to where that money is going. It’s one thing to see a $4,000 charge on your business account; it’s quite another to realize that charge was for donuts.
There are some services that will a significant amount and others that should be exceedingly small costs which hardly impact the bottom line — the key is learning the difference.
Again, when your business is young, you don’t want to overspend, especially on relatively insignificant items or services. Thus, having a detailed description of an expense is a useful tool for managing your business spend and reducing the possibility of inefficiency and waste.
Are You Getting What You Want?
What you spend and what you spend it on are critical questions to answer, but most important of all is this: Are your expenses fulfilling a necessity for your business? Are you getting exactly what you expect from the expenditure, or are you getting more or less than your business needs?
Wasteful spending can easily get out of hand, so you need to be mindful about every expense. You should also periodically review longstanding expenses to ensure that new circumstances haven’t made them obsolete.
How Do You Manage Spend?
There are two ways to calculate how much you’re spending, what you’re spending it on, and whether you’re getting what your business wants and needs:
The Hard Way
The way many new or small businesses choose to monitor their spend is by writing down each and every expense, including employee wages, office space rent, utility bills, business services, office supplies, software, etc.
This method requires that you remember to note any new expenses (no matter how large or small) and be unflinchingly honest about those expenses. As your business grows, this expense list can get long and difficult to control, which is why smart business leaders opt for the easy way to manage spend …
The Easy Way
You can and should invest in tools like a business spend management platform to keep all your information about your expenses in one, organized place. Platforms like Coupa are capable of scaling with your business as it grows. They facilitate communication between you and your employees, your suppliers, your contractors, and more. They can rely on machine learning to help you identify inefficiency, and they do so much more.
You can’t answer questions about your business spend without research, and it helps to have a robust tool to keep track of your expenses from the get-go. Then, it doesn’t take a Ph.D. in finance to ensure your business budgets are right, and you can focus on the more fun aspects of running your own business.
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