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Managing your expenses is tremendously important for ensuring that your small business stays profitable and flush with cash. It’s important to keep a very close eye on your expenses to ensure that you stay within budget and don’t go into the red. Here are seven top tips for managing your expenses as a small business owner.

1) Understand Allowable Expenses

Allowable expenses are costs you can deduct from your tax return. It’s important that you understand what your allowable expenses are to ensure that you track them carefully. Examples of allowable expenses include rent, staffing costs, utilities, insurance, raw materials and tools.

2) Track Everything from the Beginning

You will probably incur costs before your business officially opens, so be sure to keep a clear record of these. You will be able to claim them back later and knock a significant amount off of your tax return. It’s also a good idea to open a separate business bank account so that you can easily keep a log of all your business transactions without confusing them with personal costs. There are also many accounting and expense tracking applications that are very helpful for this because they allow you to stay organised and see a detailed breakdown of your spending.

3) Set a Weekly Expenses Budget

You may have budgeted for your expenses over the year, but big numbers can often feel abstract. Breaking your budget down into weekly goals gives you a better idea of how much you can afford to spend and allows you to identify where changes need to be made. This will also help you to understand how you are performing against your budget and put policies in place to keep your finances under control.

4) Take a Little and Often Approach

If you only update your books once every few months, you might find yourself buried beneath a pile of paperwork. It’s better to take the little-and-often approach to updating your records and do it daily or weekly. If you need to, set aside a block of time each week to do so. It’s also a good idea to install your accounting software app on your phone so that you can access information on the go.

 

5) Create a Cash Reserve

As a business owner, you will find yourself facing unforeseen costs at one point or another and it’s important to be prepared. Out-of-the-blue expenses such as equipment replacements or repairs shouldn’t devastate your business or blow your budget. It’s a good idea to set some cash aside to cover unforeseen expenses so that you can protect your budget with a buffer and sleep easier at night.

6) Shop Around

One way to make managing expenses easier is to find cheaper alternatives. It’s often worth shopping around and trying to negotiate better deals with suppliers to ensure that you’re not overpaying for goods and utilities.

7) Encourage Remote Working

Allowing employees to work remotely has some serious benefits for business owners. Global Workplace Analytics found that 60% of employers identify cost savings as a major benefit of allowing employees to work from home. Expenses such as utility bills, cleaning services and even refilling the coffee jar are greatly reduced when employees work from home more often. Furthermore, research by Stanford University found that employees are 13% more productive when working from home, so employers get more out of their staff whilst saving money.

Summary

Every business owner must manage their expenses carefully. It’s important to understand which expenses are allowable and track them even before the business officially opens. Setting a weekly expenses budget and taking a little-and-often approach to bookkeeping also goes a long way towards better expense management. Finally, shopping around, creating a cash reserve and allowing employees to telecommute at least some of the time can also help to make your expenses feel more manageable.

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