In our "Keep your business organized" series, we've covered a number of issues that need to be addressed in order to make your business operations successful and sustainable. So far, we have been mostly driven by the principles of business efficiency, that is, we have focused on how to achieve better results with less expense. However, one of the most direct, thus measurable and tangible issues of decisive importance in terms of efficiency, namely costs, was not mentioned.
I hope our readers are mostly unfamiliar with the common situation when, reviewing seasonal or end-of-year accounting, it seems that there should be more in the cash register. (If you already experienced this, it is especially worth reading through the post!) Then, of course, there is a review of the expenses that took the revenue: a travel account here, a small "representative" cost there, some unnecessary purchase at another place. In such cases, there may be remaining stocks (eg. last season's Easter products that we did not sell ...) or even the result of inventory shortages. But there is only one thing that matters to the end result: the money is not where it should be. In this case, the question may well arise:
If your company has some history, then you may have experienced that there is always a sudden extra cost of some kind, for instance, in the end the travel did not fit into the planned budget (maybe no travel budget at all...) or even bought a lot of office supplies. (And everyone has 30 pens in the office ...) An effective countermeasure to such situations is cost planning based on recent experience or available resources. That is, at the beginning of each year, it is necessary to determine the exact budget for each department or operation. Sales costs for example may include exhibition costs, telephone costs, travel expenses or even personal expenses. However, these costs appear slowly, one by one during the year and do not represent a significant amount by themselves, so in most cases they are "passed on", ie. approved. Then, at the end of the accounting period or at the end of the year, they appear on the cost side in a lump sum, and then, as company managers, only then can be seen exactly how large items have accumulated from the smaller cost elements. To avoid this, make a total budget at the beginning of each year and break it down into areas (sales costs, marketing costs, office costs, etc.). This is how you can see exactly how much money you will have during the year.
Your budget can only be sustained if you know exactly what kind of costs you can fund. If we know, for example, that an important trade show will be in September, then you have to say no to the expense of an April ad-hoc exhibition, in case it does not fit into the planned budget. And so on, for each area, you can determine what are the foreseeable items that you need to fund anyway, and after they are all paid, a certain amount will remain to cover any costs that may arise. It is possible that no sum will remain, in which case you need to decide which cost is expected to produce a higher or better result and spend only for that. Accordingly, of course, your staff can only claim budget for costs that were planned in advance. These may include the usual costs of working, such as travel, car use, fuel, or other meetings.
Since it may take a longer time for smaller costs to aggregate, it is important that you have a solution to show the total interim costs. Therefore, the third step to control small, insidious costs is to use a system that gives you an accurate picture about your costs and budgets at any time, without your accountant's or other outsider's help.
We suggest a close to ideal solution: it is advisable to use a system for the above purposes, which already manages cost claims, solves claims approval, manages the resulting bills AND gives you an accurate, immediate budget picture at any time.
We recommend the xFLOWer's Cloud Cost Accounting module to keep your expense planning, claiming, approval and costs under control, as this system is capable of performing all of the above functions and tasks, and in many ways provides even more. For example:
Small costs are always quite dangerous - in personal life and in business too. Making a positive decision about a small amount is as easy as it gets, but at the end of the day these sums add up, making a considerable amount of outstanding debt or may burn your profits badly. In case expenses are not planned accurately, there's a possibility to realize that small costs added up only when it is too late. Avoid such issues and headaches by using a system that supports cost accounting processes and is able to control costs and only allow as much expenditure as the budget extends.