Keeping current with business expenses is vital for managing cash flow and maximizing tax deductions. But how can you perform this tiresome task efficiently with so many other things on your plate? Below are nine questions to ask that will help cut through the clutter and ensure your business expenses are on course.
Q1 – What is your burn rate?
Business costs like payroll, software and equipment add up fast. Understanding your daily, weekly and monthly burn rate — meaning how quickly your company is spending money — can help you keep present and upcoming expenses in check.
Q2 – Which expenses should you keep?
No expense is too small or large per se; that depends on a company’s needs and the effect of the expense on its business plan. Prioritize expenses that sustain and bring value to the business.
By definition, an essential expense helps solve a business problem or drives the business’s strategic goals. Dispense of nonessential expenses to free up capital for more important ones.
Q3 – Are your fixed expenses critical for deliverables?
Analyze your fixed expenses, like staff headcount, office space lease and equipment, for example. Prioritize only those fixed expenses that are essential to achieving your next business deliverable.
Q4 – How lean can you be?
Being lean goes a long way toward making your business profitable. Instead of buying two or more apps that each do a different thing, look for software or an app that does both. Remote working is another potential cost savings. If there is no need to meet in person, use an online collaborative tool instead and use the savings on office space for things that encourage growth.
Q5 – Do you run regular cost reviews or audits?
When you run your own business, you need to fully understand your financial statements. Otherwise, you risk overlooking overhead line items by focusing exclusively on direct costs. To address this, schedule periodic reviews for overhead items such as supplies, insurance and utilities. Savings achieved will go right to the business’s bottom line.
Q6 – Are you using technology to your advantage?
Various online platforms can be used to market your business at a lower cost and good conversion rate. Business tools now in the market can also make your work more manageable by automating certain tasks.
Q7 – Is there a better alternative?
Sometimes we have to make quick purchasing decisions due to a lack of time. Do your research later to find a better deal or a new service provider.
Q8 – Do you delegate enough?
Outsourcing to a third-party service provider can reduce costs, maintain quality and lighten your workload. Freelancers can be hired on a per-project or hourly basis. Outsourcing firms and independent contractors will further minimize costs by eliminating your need to provide workstations, insurance and benefits.
Q9 – When was your last end-of-month review?
Look at every expense on your credit card statement, payroll system and banking statement at each month’s end to ensure all expenses are accurate. This also helps you assess whether certain purchases were worth it and whether you have any recurring subscriptions you need to cancel.
