How can I find cost efficiencies in my business?
Give or take the odd accounting wrinkle; profit equals revenue minus costs. It’s that simple. So your mission as a founder or director of a small or medium-sized business (SMB) is to boost the revenue side of the company and reduce costs, thus maximising profitability.
When turnover is great, but profits don’t keep pace
In a growing business, the revenue side is often going well – so well that the business is taking up all your time, and costs don’t seem that much of a problem. Yet at year-end, you are presented with a set of figures which show brilliant growth in turnover, but a slightly disappointing increase in profits. It’s clear that you need to find cost efficiencies.
Understanding where your company is spending has traditionally been a time-intensive job that few busy business owners get round to doing. However, all the little costs add up and there can be significant savings to be made by gaining control of company expenses.
The key to staying in the black is to automate the expense management process to identify cost efficiencies and free up your time as the company owner to get back to the business that matters.
Both information and control are vital
The SMB owner needs two things: the first is information about the expenses. The second is control over them. And both of these need to be provided in a way that takes up as little time as possible. The most practical and cost-effective way to achieve this is through an expense management system that comes with a dashboard. Let’s take a look at what these systems can do to cut costs and streamline your business.
Information that pays for itself
There’s a type of business information that is almost literally worth its weight in gold – or at least it would be if it weighed anything. Information is what happens when intelligence is applied to data. In a business, the expenses spending is represented by a pile of data; credit card statements, receipts and all the rest.
The business needs a system that will take all of this data and turn it into information.
If you’re using one of the best business credit cards, you should still ensure they have limits, or switch to a prepaid business card. Expense management systems such as Soldo come with prepaid business card facilities. If you don’t want the overhead of issuing a company card from a credit card provider, and particularly don’t want some of your staff to have them, you’ll be able to use prepaid business cards. You or your finance team can load these with a predetermined amount. This can differ from one individual to another, or from one period to another.
This gets rid of the issue of receipts. With minimal effort, your expense processing has just become paperless. You may be concerned that OK, you’ve lost the paper, but where’s the information you need? Once the cards are linked to the expense management system, all the transactions on them are loaded into the system. It’s still data, but that’s where the dashboard comes in.
Business intelligence – not just information but enlightenment
An expense management system will hold all the data on spending that it’s given. But it will hold it in such a way that you can use it to tell you what’s really going on with spending in the business. You’ll be able to slice and dice, and take a view across different employees, different activities, different offices, parts of the country and time periods. What you’ll get is the high-level management view. But when you spot something you want to look at more closely, you can zoom right into the detail.
Another key advantage of the Soldo dashboard is that it presents a real-time view. No more waiting around for monthly expense reporting followed by financial statements from the accounts system or credit card provider. You get an instant view of the current cost level in the business – vital for managing cash flow proactively. You can also set up alerts to spot unusual activity.
And remember, with a fully functioning expense management system, the prepaid company cards that you’re able to issue can carry rules about spending. So you don’t have to ask employees to follow explicit employee expense policies. You just set up a rule that imposes the behaviour you want.
Click here to learn more about prepaid business cards. If only the other elements of SMB management were this simple.