How do I calculate company spending?

Keeping on top of your firm’s monthly spending is essential in order to manage your cash flow and budget successfully. You must prepare an expenses budget for your firm that ensures you spend as little as possible while not compromising the business.

Operating costs

Operating costs are a fact of life. They routinely include utilities, rent and payroll. Insurance premiums paid yearly or quarterly could also be included. Operating expenses are not related to the creation of items or the cost of goods sold.

Service-based companies may only have operational costs, while production companies may also have to finance equipment and raw materials.

Make a list

Knowing your monthly budget is crucial. Start a list of all expenses connected with running the office. When you have identified your operating expenses, view the costs for previous months and look for regular transactions and patterns. You might look at receipts or bank statements to ascertain monthly information.

Write a second list for other operating costs that occur periodically, such as business card printing or website updates.

List all the monthly expenses on a vertical column. Next to each expense type, write down the monthly figure to get an accurate operating figure.

Manufacturing and marketing costs

Next, write down any costs connected with manufacturing, and add up all the expenses to create a grand total. Costs here could include raw materials or the electricity used for operating a plant or production area (do not include office utilities, as these are accounted for in the operating budget).

Keep flexible costs – such as six-monthly maintenance costs or safety training and courses – separate from the fixed.

Note down marketing campaigns or techniques used by your firm, plus any expenses separately on online campaigns or commercials, television or radio and advertising. From this, you can calculate an approximate cost for the marketing budget.

Next to each of the fixed expense costs, list all flexible expenses. So, for example in marketing, flexible fees might mean hiring freelance help or printing extra copies of the annual report, while flexible expenditures for manufacturing could include buying new raw materials and making repairs to equipment.

Final calculations

Add up all fixed sums to get one final expenses sum. There is no need to include flexible costs, as these are not required monthly. However, allow some room in your budget for unforeseen expenses, such as machinery breaking down.

When you subtract operating expenses from gross profit, you get operating income, while the operating expense ratio can be used to check the firm’s ability to control its operating costs.

The total expense sum from the operational, marketing and manufacturing budget reveals how much you need to earn to work at full capacity – but try to get twice as much on a monthly basis for flexibility and enhanced profit.

Employee considerations

It takes time and effort to manage expenses the traditional way in a firm. Having employees manually submit expense claims is time-consuming and inefficient, and having to verify them is onerous for the finance department. Here it makes sense for staff to have a prepaid business card where levels of spending can be set, and transactions are automated.

This is where Soldo comes in. Soldo’s expense management solution comprises an employee app, prepaid business card and an admin dashboard. It allows you to run reports to identify spending by month accurately. It enables you to oversee and control your team’s expense transactions in real time and transform the resulting data into instant insight.

The issue of lost receipts is a perennial concern for employers using traditional systems. However, with the Soldo app, collecting invoices which may be lost or damaged, becomes a thing of the past. The old system is replaced with employees taking photographs of receipts using a phone app and subsequently uploading them.

Help from Soldo

When you are managing the expenses budget of a growing business, you need to be in full control of spending. Few things are more unwelcome than large purchases surprising you at the end of the month. This can be a thing of the past with the Soldo expense management solution. Extravagance becomes impossible since limits can be set for individual employees, preventing overspending and those unpleasant surprises.

To find out more about how Soldo can help your business, visit us here.

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