DELIVERING MORE WITH LESS: TIPS TO MANAGE YOUR BUSINESS EXPENSES
Running a business is a costly affair and any astute business person needs to understand the different kinds of costs and expenses associated with running their businesses and how to manage them. There are many kinds of costs and expenditures and each demands a unique packaging and application for it to deliver on its designated roles.
Key among the monetary injections into your business are capital and revenue expenditure. Capital expenditure represents expenses involved in acquiring, maintaining, and improving your fixed assets like buildings, land, and machines, while revenue expenditure is short-term expenditure to meet the day-to-day operations of your business, also known as operational expenditure. These two require different approaches and planning to ensure they work in sync. Too much input in one and a corresponding deficiency in the other can affect day-to-day operations or overall costs of running the business. With Springboard Capital’s working capital loans, you can achieve a balance between your capital and revenue expenditure and ensure your business runs smoothly.
Separately, every business has fixed and variable costs; fixed costs are standard recurring costs like rent while variable costs are costs relatable to things like sales units or production done e.g. electricity and water. In addition to this, a businessman must also understand their direct and indirect costs; direct being costs relatable to a unit of production while indirect costs are the ones not related to a unit cost of production.
All of the above costs are directly linked to business operations and revenue generation and how you manage them is directly linked to the success or failure of your business.
Managing your costs better
Springboard Capital offers secured business loans that can be a helpful tool to mitigate low cash flows your business may experience. When considering taking out a secured business loan, it is essential to make informed decisions based on historical data or budget. Additionally, you must rationalize these decisions based on different operational variables and circumstances, such as whether it is more cost-effective to rent or build and how it will affect your working capital and daily expenditures. As you plan your expenses, you must also match them against potential revenues and the margins you need to achieve desired profits. Tracking and monitoring your costs on a daily, weekly, or monthly basis is also crucial, as it informs your cash flow, available money, and business decisions necessary to maximize your income levels. With Springboard Capital’s secured business loans, you can get the best financing to help you achieve your business goals.
Tracking your expenses
As a rule, you must have a clear view of your day-to-day operations by tracking the ins and outs and the factors affecting your costs and income levels. Further, you must treat your business as an independent entity, have a separate bank account, and formalize its operations through record-keeping and where acquiring systems to help you manage your income and expenses. Your records speak to the state of your business and as such your ability to interpret them correctly affects your ability to make right or remedial decisions to keep your business afloat.
Cognizant of the above factors, how can you make your business lean and agile?
Lean organizations have demonstrated several characteristics, among them being tech-savvy; technology helps in automating, brings efficiencies and improves quality and this can translate to higher margins and returns for them. Further, these companies are very agile and adaptive being able to translate industry challenges and or opportunities into money-making ventures. Things like Zoom, apps, changes of processes, automation, and digital platforms have given many businesses advantages over their peers that don’t use them.
While these measures represent cost savings, part of managing your expenses lies in ensuring these adaptations and savings do not dilute the quality of your final product and customer experience.
Further, these businesses have achieved at least 50% or less profit ratios of the revenues generated meaning all monies coming in 50% or more represents profit not working capital. In addition, the said businesses also ensure they meet their obligations like taxes and outgoing payments, they are in control of their credit period, and have shorter and efficient debt collection periods while maintaining their product quality and superior customer service; they understand it takes more than liquidity to make the magic happen.
Should you wish to understand your costs and ratios, and how to make all these things work for your organization, look no further than our financial institution. Our team of experts have invaluable experience to inform your journey to a lean and performing business that is delivering value and profit margins for its investors. We also offer various loan products such as Business Loan, Emergency Loan, Asset Financing, Salaried Loan, Loan against Logbook, Import Duty Financing or Title Deed Loan, to help grow and manage all operations. Contact us today at 0700 944 444 or WhatsApp us through the button below, or email us at info@springboardcapital.co.ke.
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Article based on Steve Mburu Webinar Presentation -Steve is the Head of Finance and Admin at Springboard Capital where he oversees the Finance Team. He is responsible for developing and managing the company’s financial strategy, which includes budgeting, forecasting, and cash flow management. He has over 10 years of experience in the financial industry and is known for his collaborative approach to leadership, which has enabled him to build strong relationships with stakeholders across the organization.
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