Costs are crucial. From managing your inflows of money to your outflows of expenses, it’s important to know where your money is coming from and going to. While it’s easy to manage every cent of your budget as a startup, once business grows, it’s much harder to maintain full control and purview of your budget.
Here’s how you can lock down your business’ inflows and outflows to ensure that your financial state remains stable (and on the uptick!).
Invest in ERP Software
If you’re still managing a budget using a spreadsheet, you’re way behind on the times! To make it easier to track, manage, view, and to collect metrics on your inflows and outflows, you’ll need to invest in an enterprise resource planning system. This system often includes various software applications that allow you to manage accounting, financing, inventory, purchasing, and other business processes in a central location.
With the right software, managing your business’ money is much easier, and you can even crunch numbers and view metrics to help you grow with data to back decisions.
Have a Long-Term Strategy
The key to successfully running a company for years and years is to start with a long-term business strategy. While you’ll want to have a clear picture of your mission, vision, goals, product benefits, and target audiences, it’s also important to take a look at cost management.
In fact, money decisions should be based on your company’s strategy rather than a short-term process. For example, you don’t want to overstock your inventory just because the manufacturer has slashed prices. Instead, you should be purchasing quantities that meet customer demand.
Having a long-term strategy moves you away from the mindset of buying for the present. Instead you can make purchases that make sense now and long into the future.
Know Your True Cost-Revenue Structure
One of the most important parts of managing your company’s budget is to have a true picture of your cost-revenue structure. This includes not only knowing how much money you’re bringing in but also your true costs.
First pinpoint your sources of revenue. How much are you bringing in from sales? What demographic is spending the most money on your products? From there you can determine which costs you accrue to produce a revenue stream.
When determining your cost-revenue structure, it’s also important to account for costs that aren’t directly tied to revenue, such as overhead costs. With a clearer picture of your costs and expenses, you can better manage your business’ money.
When managing costs, there’s no quick fix to cutting costs, but there are all sorts of things you can do to lessen your outflow and ensure that your inflow amounts are being used as efficiently as possible.
For example, consolidate services and equipment where possible. Let’s say you recently purchased service from the best business VOIP service so that your company can enjoy seamless and modern communication. With this new service, you may be able to reduce the amount of IT equipment you need, such as video conferencing, webcams, and outdated telephones.
Take a look at the vendors you work with and ensure you’re not only getting a good deal, but also that you aren’t paying for things your company no longer needs.
Other ways to save money include:
- Using cheaper suppliers
- Bundling services
- Reduce waste (ie. electricity)
- Lead generation plugins and analytics software
Cutting costs doesn’t have to mean giving up something that your company needs, but trimming down on costs where possible will make you money go much farther.
While it’d be nice to renovate the entire office or purchase the latest iPod models for each of your employees, managing your inflows and outflows is all about prioritizing. Invest in products and services that will make your employees more productive and efficient. You’ll also want to invest in things that positively impact your customers. In turn, you can put money towards items that are sure to provide a healthy return on investment.
One of the biggest mistakes that people make when managing their budget is not updating it. Over time you’ll need to adjust your inflows and outflows. As your income increases or as you take on new monthly expenses, your budget needs to reflect changes.
View your budget as more than a way to plan and see where your dollars are going. Instead, use it weekly if not daily to gather metrics and to have real-time data as to where your money is going and what money is coming into the company.
Managing business inflows and outflows can be quite tedious, but when done properly, you can better position your company for financially stability and overall success. Keep these tips in mind to lock down your business inflows and outflows.