Startups: Here’s Your Guide to Effective Expense Management 

Startups: Here's Your Guide to Effective Expense Management

In the early days of managing your startup, the basics of finances might be the least of your concerns but letting financial management fall by the wayside is a problematic habit for new CEOs. Obviously, you didn’t become a business owner because of a burning passion for spreadsheets and financial planning. You know that underneath each growth milestone and performance target your early-stage business hits, there are hundreds – even thousands of dull, day-to-day decisions calling for your time. Processing bank statements and paying bills can be a big part of this. 

So, whether your startup is six months or five years old, it truly pays to have an effective expense management plan. Let’s examine the must-dos for CEOs who want to improve their startups’ financial health. 

Hire a Dedicated Finance Team 

Without a dedicated finance team, startups are much more likely to make uninformed financial decisions that could hinder the company’s development in the short or long term. Recent findings show that 60% of small business owners are not confident in their accounting and finance expertise. Businesses that hire a dedicated finance team, on the other hand, can benefit from the support of a skilled financial expert for probability and growth and are more likely to outdo their competitors. 

Effective financial management goes beyond processing contracts and updating your accounting book. It’s more about finding and using intelligent information to make more educated decisions. Here’s where a dedicated financial team comes in, providing you with answers to the questions you didn’t even know you needed. A finance team will handle every financial aspect of your business, from income and expense management to forecasting and budgeting. 

Accounting tasks such as tracking company spending and filing expense reports are time-sensitive and often tedious. These priorities shouldn’t fall in the hands of the CEOs who’re already hustling with finding customers and growing their business. 

Automate Account & Finance Management 

Automating repetitive tasks has never been so easy in today’s highly digitised business environment. There’s software for everything, and storage is unlimited. Digitising everything from accounts, documents, contracts, and every other critical business document is maybe a great way to avoid being swamped with incessant paperwork all the time when you should be managing other business tasks. 

  • Store critical paperwork online. Keep hard copies in separate files and a compartment with clear tags. 
  • Use software for accounting to store all bookkeeping and accounting records and manage daily invoices and payments
  • Store bank records in a mobile banking app 
  • Use cloud or note-taking apps to save all relevant business contacts 
  • Store trademark applications, permits and licences on Cloud 
  • Use a human resource software to handle employee records and essential financial automation 

Spend Only When Necessary 

Frugality might not be the first thing to fall into your mind when talking about expense management, but it is something that pays in business. Spending on what is essential, after all, allows you to be efficient. If you want to stay above the floating line, you will need to find a balance between cost-cutting and making intelligent financial decisions. 

Being frugal means, you should think clearly before making any substantial purchase or decision that may affect the financial state of your startup. It also means forecasting your financial picture to meet key goals, determining whether it’s time to sign for a loan, or simply deciding it may be time to cut expenses. 

Understand where your money goes 

Understanding cash flow is an integral piece of clever financial management. One recent study revealed that 85% of businesses failed due to cash flow issues. Creating a cash flow worksheet will help you cover a specified period of time and account for a particular amount of money spent. It will also help you dodge unnecessary bank account overdrafts, unnecessary spending and overspending. 

Use secure and flexible payment methods 

In the early stage of managing your startup, you and your team rely heavily on the company credit card. While it may be tempting to prioritise your team expansion, credit card spending may not be as easy to monitor. 

Luckily, there are a number of great financial support options besides the classic company card. Many companies now offer expense cards tailored to individual staff members. These cards come with a limit set on individual and categories of expenditure (for instance, accommodation. Travel expenses, or marketing activities) which means you will know who and how much goes where. 

As a business owner, these flexible payment methods give you a quick and simple oversight, ensure you have a better picture of your employees’ expenses on a daily basis, and reduce the potential for nasty financial surprises at the end of the month. 

Also, the advance of online, single-use credit cards has made expense management a more bearable task. Teams can now create virtual credit cards to be used specifically for relevant purchases. These purchases can be then monitored and approved in real-time, reducing the misuse and fraud potential. 

Research Your Funding Needs 

Many business owners turn to outside funding to expand their early-stage businesses. There’s a lot of thinking and research to do if you plan to go this route, including how much money you need, your credit history, the loan’s repayment terms and when you need your money. Not to mention that not every kind of funding will work for your specific type of business, which means you must determine exactly what your business needs are in order to make an educated decision. 

Startup owners should consider financing options such as: 

  • Grants 
  • Traditional loans from banks 
  • Invoice factoring 
  • Merchant cash advances 
  • Peer-to-peer lending 

Before You Go…

If you’re not a financial wizard or managing expenses isn’t your strongest suit, consider hiring a team of accountants or financial advisors to steer you in the right direction. 

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