As your startup grows, you’re bound to make a few mistakes. One pitfall you’re likely to run into is poor spend management. The truth is, you need to approach your spending with pinpoint precision, looking into each expense with a fine-tooth comb, otherwise, you risk ramming your startup towards a dead-end.
According to a recent survey by Lola, 8 in 10 budget owners consider spend management to be too challenging. As a founder trying to keep your startup train on its track, managing spend can be an even more taxing challenge.
In just a minute, we’ll discuss some money-draining mistakes that you need to avoid to ensure your startup runs smoothly.
But first, why should you pay more attention to spend management?
The benefits of a spend management solution for your startup
Spend management’s main goals are to prevent reckless spending, improve supplier relationships, and maintain accuracy throughout the entire billing lifecycle. Here’s why every small business owner should embrace spend management:
This is a no-brainer. It makes sense that if you manage your business spending habits, then you will save a lot of money that can be redirected to other aspects of the business.
- Improves procurement efficiency
By doing away with the manual processes that would take up your valuable time, spend management optimizes procurement processes.
- Enables you to manage risk efficiently
With a spend management solution, you have access to the market trends where you can identify and assess the risk factors. This will help you develop contingency plans, allowing you to navigate around the risks before they occur.
That said, here are the common mistakes you may be making:
Not investing in spend management software
A spend management solution will help you optimize your company’s spending habits, streamline your cash flow, and show you where you’re losing money and where you can reduce risks.
It helps you identify trends in the market and keep track of how much money is going out. With this information, you can budget accordingly while ensuring that there are sufficient funds available at the right times.
Luckily, implementing an expense management platform doesn’t have to cost you the world. Penny Inc’s platform, for instance, lets you configure projects, offers your teams more flexibility, and allows you to manage spending effortlessly.
What’s better is that the service doesn’t require you to pay anything. This means that there are no transaction fees, subscription fees, and transfer fees.
Impulse buying doesn’t only apply to ladies and their love for shoes; it happens more often than not in the startup world as well.
It may be as small as grabbing a few extra office supplies that weren't on your shopping list or as huge as leaving a car dealership with a spanking new company SUV when you were initially ‘’just browsing’’ what’s on offer.
To put it simply, if you purchase something you didn’t plan for, you’ve made an impulse buy. This habit can steer your startup towards a slippery slope into debt if you’re not careful.
Another mistake you can make is buying products by focusing on their quantity rather than their quality or value. When purchasing products, you should adhere to the procurement procedures and processes that are in place.
Neglecting your relationships with your suppliers
Maintaining a healthy relationship with your suppliers is beneficial to your business. When you regularly communicate with them, you’re more likely to remain up to date with new products in the market and innovative ideas that may benefit your business.
Here are a few tips to help you maintain healthier relationships with your suppliers:
- Always pay on time. Making late payments is the fastest way to tarnish your relationship with your supplier.
- Ensure you store all your purchase records. Proper record-keeping prevents your supplier from going through the hassle of resending products.
- Try to maintain constant communication. If possible, set a date to meet your supplier over a cup of coffee to discuss business operations.
- Be honest from the get-go and stress the importance of honest communication.
- Ensure you understand your suppliers’ objectives, purpose, and mission. By doing so, you’ll be able to know whether your business aligns with theirs, and see whether you can grow together.
- Avoid making last-minute orders. Ensure you give earlier notices to avoid rushing your suppliers.
- Understand how they do things. Failing to follow their processes means you’re inconveniencing them, and your relationship may quickly turn sour.
A lack of transparency
When you’re working with a small team, transparency may not be a huge problem for your startup. But as your business scales up and your teams enlarge, you’ll find keeping track of receipts, invoices, and purchases hard to keep up with. And it’s at this stage that a lack of transparency rears its head.
Making purchasing decisions, for instance, can be confusing for your procurement team. Sometimes they can make purchasing decisions without needing input from other departments. But in other cases, they may need to loop in the necessary shareholders before making purchases, especially if a purchase affects other departments.
The lines between what needs approval and what doesn’t need it can easily get blurred. That’s why you need to implement a strict set of guidelines to ensure every company penny is accounted for.
The key lies in the communication between business leaders and teams. You need to emphasize the importance of aligning spend management to your startup’s goals.
After all, better spend management practices can make a huge difference to your startup, helping you pivot from surviving to thriving.
Avoid these spend management mistakes by choosing the Penny Inc
Penny's spend management platform can help you get a better grip of your finances, as it allows you to manage your cash flow more effectively.
You can empower your employees with a Penny Prepaid Mastercard that helps you prevent impulse buying, monitor business expenses, and avoid blowing your company budget.
Sign up for free today to ensure your scaling business continues to thrive in the future.