5 Easy Tips for Managing Costs as a Business Owner
As a business owner, it’s crucial that you manage your costs well. Small businesses tend to have smaller profit margins, so it’s essential to keep control of your costs. Here are five easy tips on how to manage your expenses:
1. Start Immediately
Most businesses incur costs before they officially launch. It’s important to keep a careful track of all your expenses before you start. Even small costs can really add up over time! If you don’t want to pay more tax than necessary, carefully record your expenses from day one.
2. Open a Separate Business Bank Account
Opening a separate business bank account makes it much easier to keep track of your spending, as it avoids confusing business and personal transactions. You cannot claim personal expenses as business costs, such mistakes on your tax return can result in expensive penalties. Also, having a separate business account means that you won’t overlook any transactions & pay more tax than you should.
3. Use Accounting Software
Online accounting software makes it easier to manage your spending. Many programs allow you to upload pictures of your receipts and invoices and then organise them accordingly. This saves a lot of time and prevents you having to manage a huge backlog of records all at once.
Accounting software will provide you with a clear picture of your spending & even allow you to understand which costs generate the most significant return on investment. This allows you to cut costs and focus on profit-generating activities.
4. Create a Clear Budget
Creating a realistic business budget you can stick to, is a key step in managing expenditure. You will be able to monitor your performance against this budget & adjust it when necessary.
In order to create a realistic business budget, you must first calculate your income, then determine your costs & work out your profit from these figures. This will tell you how much you can afford to spend. Be sure to review & update your business budget regularly; an outdated budget is of no use to anyone.
5. Take the ‘Little and Often’ Approach
Let’s be honest: bookkeeping is unlikely to be your favourite task. Take the ‘little & often’ approach – spend a little time each day or week to record your expenses and measure them against your business budget. This will give you an accurate idea of what you’re spending & allow you to fix potential problems before they spiral out of control.
Summary
Conscientiousness is the key to prudent expense management. Being proactive about bookkeeping will make it easier to manage your spending. A clear understanding of where your money is going is crucial if you want to cut costs. By creating a realistic business budget, you create a roadmap for spending that will make it easier to make smart decisions when it comes to expenses.
For help, PM or email me on Josef@MrBlueski.co.uk
