Money, money, money, money . . . we work so hard to attain it in our businesses. We put time and effort into establishing the right fees and rates. We get lots of clients and customers – and the money starts rolling in. But where does it all go? We think we have a grip on what we’re spending on a day to day basis, but do we really? When we do start bringing in the bucks, much of the time we end up wasting it or throwing it away. Suzette Flemming, owner and CEO of Flemming Business Services, shares some great tips on how you can find out if you’re keeping your hard earned money, or just throwing it away.
What Would You Do With $1,200?
By Suzette Flemming
It’s not a dream. What would you do with an extra $1200? You could buy a new computer, start or pay into a retirement plan, pay a few bills and the list goes on. The trick is to find the $1200. I found my $1200 in a telephone line that was no longer being used. I had the line disconnected. When the next bill arrived I had saved $100 over the previous bill. Over the course of a year, I found $1200. Where will your extra money be found?
The search starts with your checking account and ends with your credit cards. If you have your accounts in a software program run an expense report that shows each expenditure by category (i.e. advertising, office supplies, etc.) for the past three to six months. This time frame will give you a good look at repetitive expenses. Seeing items grouped by category of expense will also give you a clear picture of trends that may be occurring.
Look at each expense as well as category and ask yourself these questions:
- Is this expense necessary for the operation of my business?
- How does this expense enhance my business?
- How does this expense give value to my client?
- What value am I receiving for the money I’m spending?
- Has the expense increased over time? If so, is it due to increased business?
If the expense isn’t necessary for the operation of your business, doesn’t enhance your business nor give value to your client, or you are not receiving a benefit then it is time to cut the expense. Increases in costs are normal to operations. However, if the increase is more than 10 percent then you need to evaluate the reason for the increase. I have a client that saw his expenses increase by more than 60 percent due to the astronomical increase in gas prices.
Unfortunately, he is a traveling salesman and he isn’t able to trim much of that increase. Controlling expenses isn’t limited to times when your budget is tight. It is especially important to evaluate your spending when your cash flow is abundant. CEOs, owners and managers have a tendency not to evaluate spending when money is flowing. One of my clients had more than $120 a month in repetitive charges on his debit card for subscriptions to Internet services that he had forgotten about. He had started using the services when he had good cash flow and stopped using them as he got busier. However, he hadn’t cancelled the services and the charges continued. In twelve months he spent $1440 that could have been in his pocket. If you hesitate when answering the questions or have to look for a reason you are spending the money, it isn’t money well spent. Your extra money is waiting to be recovered. Seek and ye shall find.
It’s time to look at your actual expenses vs. your budget. Are you where you thought you would be? Are your expenses more than they should be?
If you have questions or need clarification on anything, please feel free to call (425.432.5870) or email us.
Since 1994, Suzette Flemming, owner and CEO of Flemming Business Services has been assisting service corporations, e-commerce start-ups and non-profits in untangling their finances and providing clear financial direction.