How can I see where we’re overspending?
Overspending can cause serious problems for a small business. Too much cash going out and not enough cash coming in can spell disaster for a business’s cash flow. And, in the current climate, keeping tabs on overspending in your company has become more important than ever. Because no one quite knows what’s around the corner…
The coronavirus pandemic has heralded changes in consumer spending habits and is impacting some sectors like hospitality and travel at an alarming rate. It’s clear that businesses need to take control of overspending now, to deal with lumpy cash flow and the uncertainty of the months ahead.
How to spot overspending
There are some common reasons businesses overspend, including not sufficiently planning ahead, overstocking inventory, and not setting (or sticking to!) budgets across different activities and departments. Can you honestly say you have an idea if your HR, operations or marketing team are over or under budget this month? What about the last three months? This is the detail that will help you control overspending and keep your cash flow healthy.
The key to spotting overspending is to use an analytics and reporting tool to give you better insight. Accounting software such as Xero and QuickBooks offers some insight, however to truly understand where your business is overspending, you could use an add on like Float for a more detailed picture. As well as cash flow forecasting, Float offers a number of insights features to complement your forecast and help you identify any issues before they become a major problem.
For example, the budget vs actuals report in Float (example above) will help you see at a glance if you are spending more than you’d planned in any specific area.
And the accounts to watch feature will highlight where you are spending over budget most significantly. By surfacing this information for you, Float raises a red flag to any notable fluctuations in budget, which means you don’t have to spend time digging around for this information.
The single account deep-dive view will also allow you to delve deeper into more granular detail on one area of spending – e.g. your utility bills or marketing expenses, for example. So you’ll know exactly where the overspending is occurring and can take swift action to prevent further over expenditure.
With all this information at your fingertips, overspending will no longer become a nasty surprise, but rather something you can nip in the bud before it causes serious cash flow problems. Leaving you to get on with the day to day running of your business.
How to deal with overspending
Once you’ve identified areas of overspending, the next step is to move toward a healthier cash flow by either increasing cash into your business or cutting any unnecessary spending.
If your business is in dire need of a cash injection, then working with an accountant to look at where you can minimise your tax liabilities and getting advice on loans, grants and other business funding could help.
To cut outgoing cash, there are a number of areas you can look at to reduce spend:
- Office space
- Do you really need a plush office in that trendy postcode? With more businesses going remote due to the pandemic, it could be time to rethink what office space you actually need.
- While many businesses are desperately trying to retain as many employees as possible, you may want to consider outsourcing any new work that comes up, instead of hiring permanent staff for the time being.
- Insurance and utility bills
- When was the last time you shopped around to find the best deal on your insurance or energy bills? Even calling up your existing suppliers can often result in a better deal and ease the financial burden on your business.
- Many businesses have subscriptions ticking along for products or services they no longer use. Now is the perfect time to review which ones you need and cancel those you don’t.
- Office space
To help you identify exactly where you need to cut spending, you can use Float to review spending over the past 3-6 months and pinpoint areas for improvement.
Chris Davies, owner of Dog And Pony Studios an international creative agency, told us:
“When I click a tab in Float I see exactly what’s going on in my business, with detailed insights. I can see which invoices have been paid and which are overdue. Instead of waiting for my end of year accounts to see where we spent money, I can see it monthly or even weekly. I’ve been able to make decisions on operating expenses on a per-case basis, such as switching internet, hosting and insurance, because of how granular Float is.
“The money I’ve saved has been put towards financing current work-in-progress, but occasionally it becomes my dividend.”
Want to try Float out? Get a free 14-day trial and banish overspending for good.