You've got to spend money to make money, as the adage goes, but that doesn't mean businesses can spend money recklessly. Smart financial management is key to running a healthy (and profitable) business. With the right strategies in place, finance leaders can empower remote employees to spend what they need, while ensuring they spend it wisely.
Trouble is, there are many hurdles when it comes to smart SMB financial management. We sat down with John Mac Namara, founding director of Business Cost Management, a global cost management consultancy, to hear his advice for how SMBs can limit unnecessary spending without limiting employees' ability to do their jobs.
1. Set a Company Budget — and Stick to It
Revenue fluctuations in a small business are common, so it's essential to carefully manage cash flow. Mac Namara suggests holding line managers and supervisors accountable for budget compliance with a monthly budget review.
Aside from budget management, it's important to consider where revenue will be best spent. “SMBs are exposed to the risk of making poor procurement decisions, do not have the resources to develop good cost control measures internally and are often unaware of emerging trends and solutions which would be more cost effective in their business,” Mac Namara warns.
While it may be difficult to justify spending funds to hire or contract purchasing personnel or category experts in areas such as packing, communications and IT, this type of investment may benefit your business in the long run.
2. Define Purchasing Controls
Defining rules when it comes to purchasing can help you stay on budget and manage cash flow without extensive oversight. Mac Namara suggests requiring two approvals on purchases over a minimum value, and at least three quotes for all purchases over a predefined value.
“These are two very basic purchasing controls,” he says, “but even these simple rules give a lot of control of business costs.”
3. Consider Cloud-Computing Solutions
SMBs rely heavily on manual methods for expense management, a recent survey found. Relying on outdated expense processes such as paper-based submissions, corporate cards or Excel can create a slow turnaround time for reimbursements and increase invoice-processing costs.
Instead, consider cloud-based accounting or expense reporting software to manage cash flow and automate mundane tasks.
4. Examine the Pros and Cons of Remote Work
Remote work may be ideal, even unavoidable, for roles such as field service and sales. But Mac Namara urges companies to carefully consider the advantages and disadvantages of remote work in non-essential situations. When deciding whether or not to use remote workers, consider the nature of your business, and carefully weigh which non-essential roles are necessary for remote work.
If in-office costs are a concern, consider a bring-your-own-device (BYOD) program where employees are allowed to bring their own smartphones or tablets to work. This can help save on technology costs, and will ensure employees have access to work devices both in and out of the office. When setting up a BYOD program, outline a specific policy for security measures.
5. Consider the Cost of Your Time
One in four small business owners believe each productive hour in their day is worth upwards of $500, according to a recent study, and those owners are working longer and harder hours.
Take back your time by using collaboration tools such as a unified communication system, giving priority to the most important tasks, taking advantage of online platforms for administrative functions such as payroll and travel planning, and encouraging the use of mobile apps.
Back office management is a tough business for SMBs, but the right processes and technology can help support growth, build a strong financial base and position your company for future success.
Rian Ervin is a freelance journalist and writer with experience in emerging and enterprise technologies.