As a business owner, you're often the person who has the final say in decisions about money. While there may be many different people working at your company, it is ultimately your responsibility to make sure that every penny of expense is necessary.
This is why asking the right questions before approving company expenses is important. You want to make sure you are spending the money properly and investing in things that will help your company grow.
Before you give a green light to any expense consider these 10 questions:
Every company has values that they adhere to, even if those aren't explicitly stated anywhere. As a business owner, you should know what your corporate values are and how this new purchase will fit in with them.
For example, you may place an emphasis on reducing waste within your organization, so investing in something that tends to be wasteful could put you at odds with your own internal compass. Make sure each purchase aligns with your company's core values before moving forward.
Every business is different, but all companies have a growth strategy in mind. You need to understand how this new purchase or expense will affect that growth strategy.
Will it help you achieve your goals faster than before, or slow down the process? For example, if you're considering investing in new advertising, ask yourself whether or not it could help your company grow. Does the ad campaign come with a set of KPIs to track growth? If so, do those metrics align with what your company is trying to accomplish?
Depending on the size of your company, your expense policy may stipulate what expenses are allowed and which aren’t. For example, does your company allow employees to take clients out for lunch? Does it provide a pre-approved list of vendors that you can purchase office supplies from?
Work with your finance team to make sure each expense falls according to the policies you’ve established. If it doesn't, flag it for further review.
When you're approving expenses, it's important to consider what your company has been spending in the past for similar services and products.
Is the expense request outside of the norm? If it's not, that doesn't necessarily mean it's a bad purchase or an unnecessary one. However, if you have never spent money on a particular service before, it's worth investigating why you are making this purchase now.
If your company decided to invest in new software, for instance, then it would need to also consider how that software would be supported in terms of both hardware and people.
For example, if your business is considering purchasing a new storage system, ask yourself whether existing hardware can support it. You may need to upgrade your network or add new servers before the investment makes sense.
Sometimes it's helpful to consider the alternative when you're thinking about making an expense. Consider whether there is a better solution than what your company is currently considering.
For example, if your business is looking into replacing its existing software, ask yourself whether it makes more sense to spend that money on improving or expanding upon what you already have.
As with any big expense, it's important to think ahead and determine how long that purchase will stay within your budget. Will this be a one-time charge or something that could continue costing your company for months or years? If so, can you manage those costs differently in order to get the most benefit from the purchase?
In addition to these questions, consider asking for an ROI on the purchase. This will help you think about what you're looking to get out of the expense and whether or not it's worth your investment.
Team members are the lifeblood of your company, so you want to make sure they are getting what they need in order to be successful. Consider whether an expense will make the team more efficient or improve their working conditions.
Consider the impact your purchases have on your team. Ensure they allow your team to work smarter, more productively, and more efficiently. If a request does not enable your teams to do so, then consider flagging it.
It's important to be fiscally responsible with your company's money. Before moving forward with any purchase, ask yourself how this will affect your business's financial health. Will it help you achieve profits you wouldn't have before, or is there a chance it could lead to negative cash flow?
You need to consider the big picture when asking these questions. Will this purchase help your company increase its bottom line? If so, is it by a significant margin or just a little bit? This will enable you to see the value in the money you're spending with each new purchase.
Although not every purchase needs to solely focus on customer experience, it's important that you consider this for each expense. Ask yourself whether or not the purchase will improve your customers' experience, either through heightened convenience or a better overall product. Customers can be difficult to please at times so you want to use every opportunity possible to do something special for them.
For example, perhaps you're looking to purchase an electric sign for your restaurant. If it's in a busy area with high foot traffic, this can improve customer experience because it helps direct customers towards the restaurant. Don't miss out on an opportunity to leave a positive impression on your customers.
As your business scales, the number of employees increases, and you onboard more clients, managing expenses can be challenging. If you don’t know where your funds are going, you can fall victim to employee fraud and mismanagement of company money.
That’s why you need a platform like Penny to better manage company spending. The platform allows you to approve spending requests with ease, track business expenses, and stay within budget. Sign up for a free account today.
