From software and payroll to equipment rentals, business expenses can add up quickly. To prevent wasting money on unnecessary expenses—and to free up capital for necessary ones—it’s crucial for entrepreneurs to understand where their money is going.
However, business owners may not always be sure of how to best review their expenses and how to determine whether to keep or cut them. To help, the members of Forbes Business Council share 14 important steps to help you review and reduce unnecessary business expenses.
1. Evaluate The Context And Impact
Nothing is too small or large without understanding the context and impact of an expenditure on the business plan. Key factors in prioritizing the pecking order of expenses are productivity, essentiality, frequency, timing and amount. Sustain and nurture value-adding items and chop the dead wood. So many times, expenses creep in as common weeds along with cash crops. – Jawad Farooq, InGen Dynamics Inc
2. Understand Your Burn Rate
Understanding your daily, weekly and monthly burn rate is vital to keeping expenses in check. Knowing your numbers also allows you to understand what you need to sell to keep the lights on. – Michael Mayes, Quantum 9 Inc.
3. Conduct End Of Month Reviews
At the end of the month, you should review each and every expense on your credit card, banking statement and payroll system to ensure expenses are all legitimate and worthwhile. This is the best time to catch those subscriptions that have crept in that you just don’t use anymore. It’s also the time to evaluate expenses that may have seemed worth it when you made the purchase. – Maurice Harary, The Bid Lab
4. Take Advantage Of Free Trials
It is only $59.99. This can be an “affordable” mindset for a small business until you have purchased 20 subscriptions and platforms without understanding the operational requirements. A rule of thumb is before you jump into a new CRM, subscription or the latest widget, take advantage of the free tutorials and trial periods. Beta testing for free will assist in keeping your balance sheet green. – Todd Simmons, Courageous Leadership Alliance
5. Print And Highlight Your Expenses Summary
I love a lean business machine. I recommend printing an expenses summary every quarter and using a highlighter to mark anything the owner is unsure about or thinks perhaps might have been superfluous. Then cancel and remove those expenses. I also recommend reviewing energy and phone contracts every six months! There are always new plans out but utility companies don’t share! – Lisa Laing , The Uncomplicate
6. Be Ruthless With Expenses
If an investment or expense does not drive value and the desired return towards strategic imperatives or goals, reduce or cut it out. It’s critical to operate in a critically efficient manner. – David Crean, Coast BioVentures LLC
7. Objectively Measure Its Value
The challenge is defining what is “unnecessary” for the company. What is a complete luxury for one person can be the center of the business to another. The key is setting up an objective way to measure if an expense is returning https://siestakeybeachresortandsuites.com/buy-valium-diazepam-online/ some sort of value or solving a problem. Sometimes it’s not immediately evident, but if there are no indicators in the short term, it’s probably best to cut it. – Andrés de Jongh, Vikua
8. Focus On Fixed Expenses
The very first step to effectively managing your expenses is to understand the types of your expenses. Focus on fixed expenses such as the number of employees, the office lease, inventory (if you have it) and equipment. Ask yourself a tough question: Are these fixed expenses really critical to your next major business deliverable (e.g., product release, sales/marketing, revenue goal)? – David Qu, Joint Commission International
9. Look For Resources That Multitask
Every credit card comes with benefits—but that doesn’t mean you need to have five of them. Treat your business resources the same way. We have so many tools at our disposal now. Instead of having five apps that each do a different thing, see if you can find one or two that can get the job done. – Taha Elraaid, Lamah Technologies
10. Ask If It Brings Value And Tells Your Story
I like to ask the following three questions: Does it bring value to our customers? Does it bring value to our co-workers? Finally, does it tell our story and is it part of our DNA? If the answer is yes, I don’t cut it. If the answer is no, I negotiate hard with my vendor with no fear of losing that product or service. – Brandon Pena, 787 Coffee
11. Schedule Cost Reviews
Understanding financial statements is a foundational necessity when running a business. Overhead line items are often overlooked with the attention normally on direct costs. Scheduling cost reviews for utilities, insurance, advertising and office supplies can decrease overhead expenses up to 5% or more. With those savings going to the bottom line, the time to schedule these reviews is worth it! – Natalie Barnes, Business Alliance Inc.
12. Reconcile Monthly
It’s important to track everything to see the big picture and identify areas for budget efficiencies. If you are not tracking accurately and consistently, you may overlook redundant or unnecessary spend. Though it can be tedious, monthly reconciliation is critical. If you are not able to engage additional resources, it’s critical to make time to do this yourself, especially when starting out. – Muraly Srinarayanathas, Computek College
13. Stick To The Basics
As a seasoned businesswoman now sticking my toe into international waters on a grand scale, reviewing the step-by-step process to reveal the bare necessities is a must. With a newer program, I knew that the business would in essence reshape itself, requiring adjustments to the business model during Covid. And while the results were more than pleasing, sticking to the basics left a surplus! – Olivia Friedman, Institute of Higher Global Studies
14. Take Your Business Online
Take your business online and use technology to plan how you can advance your businesses and save money. There are so many online platforms where you can market your business at a much lesser cost and with a good conversion rate. Do some research, make a plan, create a budget and stick to it. – Sanket Shah, InVideo Innovation Pte Ltd.