SMBs have limited resources. This is why they need to ensure that their financial habits are evolved enough to handle the changing market dynamics. For example, with the onset of COVID-19, over 140,104 companies had to shut down operations. As a result, SMBs worldwide have begun to realize that every penny needs to be accounted for if they’re looking to survive through uncertain times.
For this very reason, we’ve crafted this article to help SMBs employ strategies to identify and prevent some of the most common overspending mistakes for 2022. Let’s dive in!
Strategy 1: Review your hiring policy
It isn’t difficult to hire a new employee but rather to train them. Existing team members would have to put in multiple hours of training to enable the newly hired to adapt to the company culture and work model.
In addition, there will be several instances where a freelancer or external agency can get the job done instead of hiring a full-time employee. Therefore, SMBs need to ensure that they’re really in need of an extra hand before deciding to hire.
As a business leader, you need to understand that any mistake in the hiring process will lead to a great deal of wasted money, effort, and time along with bad company reviews and employees with poor morale. Thus it is essential to keep employee satisfaction and retention in mind while going about the hiring process.
Some quick pointers to look into during hiring:
- Can existing teams manage work if there’s a reshuffle or priorities and projects?
- Can outsourcing be a better solution as opposed to hiring for a new position?
- How many employees would be needed to conduct the hiring process?
- How does the workload of the new employee look like in the coming months?
- Have you developed a growth plan for new employees to adapt to their roles successfully?
- Do you need to conduct awareness sessions for new hires to understand the culture and pulse of your organization?
Strategy 2: Choose an office set up for your budget
Remember the old saying, “large offices directly result in successful businesses?”. Unfortunately, it’s just a load of fluff.
Alternatively, studies show that your average office rent needs to be between 2 and 20 percent of your SMBs income.
Based on this study, if you identify that your SMB is overspending for its current office space, you can cut it short and use the money to purchase things that boost company and employee productivity instead.
Some quick pointers to choose the correct office setup:
- Identify the cost of your existing office space to evaluate if your business is overspending or underspending.
- If overspending, look for potential areas in your current office space where you can cut costs.
- Get to know your employee mindset and understand what kind of cost-cutting mechanisms they’d be open to and why.
- Once you have these details in hand, list all needed changes and how they might impact your business.
Strategy 3: Have a clear idea of marketing spends
Marketing plans aren’t meant to be trifled with. One little mistake and they could burn a hole in your company’s finances. Therefore, SMBs need to pay close attention while drafting or implementing their marketing plans.
SMBs need to understand their USPs, ideal buyer personas, and more to pull off a successful marketing campaign!
So always know if your marketing teams have spent enough time researching these data points before implementing spend.
Some quick pointers to avoid overspending in marketing:
- Always ensure that the marketing team provides sufficient data points for every business decision made.
- Research competitor strategies to look for indicators and decide whether you’d need to cancel or proceed with your current plan.
- Set up and monitor realistic timelines and budgets while constantly mapping projected and actual numbers to evaluate if the money spent was worth the time, money, and effort.
Strategy 4: Have end-to-end control over business expenditure
Business expenses are unavoidable. Be it food, travel, equipment, or technology expenses; they are often all over the place. What SMB owners need to remember is that every department has its budget and set of expenses.
While handling these expenses was challenging but manageable while in the office, remote work has made it extremely difficult for Finance teams by removing any control they had over the process. Thus, SMB owners must pay heed to address these problems as healthy finances are the crux of any successful business.
Some quick pointers to regain control over business expenses:
- SMBs can consider shifting to an expense management software that can enable them to gain end-to-end control over the expense management process.
- This helps in seamlessly achieving policy compliance by automating pre-submission checks while also simplifying expense reporting to reduce employee reimbursement TATs.
- The real-time insights in an expense report software can easily monitor company-wide spending and easily recognize potential overspending areas.
Strategy 5: Leverage the power of automation technology
SMBs have a common misconception that technology is costly and would often disrupt their existing processes. The reality, though, speaks a different story.
96% of companies that have adopted automation tools have agreed to gain immense benefits, while 43% of employees agree that automation enables them to get their job done faster. – Zapier Report
With the current workforce spread across countries and continents, staying connected becomes vital for SMBs to ensure sustenance. This, however, can only be achieved if SMBs are quick in adopting the right technologies to automate all broken processes.
Quick pointers on how to adopt the right technology:
- List all current broken processes.
- Broken here means any function that requires extra effort and attention from your employees for completion.
- Once you have a comprehensive list of such processes, list all automation tools to fix these broken and error-prone workflows.
- Choose 4-5 software to conduct test runs with (along with their competitors) to know which one perfectly suits the needs of your business.
- Finally, once you’ve made your choice, ensure employees can smoothly transition without having their day-to-day work affected.
Incurring expenses are a part of running a business but keeping constant track of whether your SMB is overspending can often be a decisive factor in ensuring your sustenance.
While the entire global workforce struggles to adapt to the new normal, software like an expense software can ensure that your SMB never loses track of business expenses. This helps business owners always stay in the know of whether they are overspending or not.