Effectively Controlling Your Small Business Expenses
informing potential business owners about the importance of managing cash flow and business accounts must be the top priority of all business programs. The inability to manage businesses expenses and documentation will send a small start-up into a downward spiral. The result could be a financial disaster, perhaps leading to lawsuits and damaged reputation.
If you are thinking about opening a business, you must have the right team in place. Such people as accountants and budget analysts can effectively keep all financial dealings and activities in order. All spending and transactions must be conducted with a legitimate purpose and pinpoint accuracy.
A business is faced with two types of spending: required and optional spending.
Required spending is vital to the operation of the business. Without this type of spending the quality of the business will suffer.
Let’s look at an example, suppose you were opening a photography business in portraiture. You will first need a facility or studio. Other necessary equipment will require:
- Two high-end professional cameras,
- Quality Background sets,
- High quality lens
- Lighting equipment
For the photography business, the above items are the essentials of a studio photography business. Other equipment necessary for the smooth operation of most typical small businesses includes:
- Computer system
- Fax machine
- Phone system
- Fax machine
- Marketing and research
- Accounting software
- Internet/email service
- Stationery and office supplies
- Electronic credit card processing
- Shipping and packaging supplies
Where is the Money Going?
Have You Ever Invested in Unnecessary Business Expenses?
Optional spending involves purchasing items and services which would be good for the company but not necessary for its smooth operation on a basic level. Spending money on unnecessary expenses can enhance your business while, at the same time, causes you to exceed your budget.
Good money management starts in accounting and payroll. If these two entities are not in order, the business is mostly likely headed toward financial disaster.
The purpose of an accountant is to organize and maintain the financial record of a company. However, if a new start-up doesn’t have an accountant, the owner must be knowledgeable enough to keep records to show where the money is going.
Managing Business Taxes
Any inaccuracies in spending could result in a confrontation with auditors as well as the IRS. Many companies fail due to indiscriminate spending. Purchasing are made without consideration for the budget.
An accountant’s job is to not allow such to happen. Accountants inform upper management of the financial health of the company and make recommendations per best practices.
Payroll must be handled with accuracy and consistently if a business wants to avoid descending into chaos within and without.
Employees must be paid on a consistent basis. Federal and state taxes must be deducted from payroll checks. If this is not done accurately, not only will a company suffer the wrath of the IRS, but also the anger of the staff.
Taxes must be paid. There is no getting around it. The IRS will zero in on those companies who mismanage their finances and auditors will have a field day in finding and reporting financial inaccuracies.
Preventing Financial Chaos
To prevent the mismanagement of funds in your new business, you must construct a fully formed budget plan and execute it as if it was the law. If you are not determined to make such a commitment, then your business struggles with finances are a guarantee.
Creating a Budget
Nevertheless, developing a budget should start with examining your current spending to determine where the money will be going. There are several things to consider, including overhead expenses such as rent, utilities, supplies, insurance, marketing, training and promotion, maintenance and repair, equipment as well as payroll and repair just to name a few.
Each month an income statement, cashflow statement, and a balance sheet should be generated to monitor spending so that the company can keep its financial status in check. The same thing should be done with each new business you open. These three money management tools will go a long way in helping a new start-up keep a cap on spending without reservation.
Organization in optimal financial health can keep everybody happy within and without. Good money management helps a company operate more efficiently. Being in good financial status will allow a company to branch out and take advantage of other opportunities that will help or enhance the operation of the company.