As a CEO of a startup, there are so many aspects of the business to keep track of, it can often feel like a juggling act. Continually making sure not to drop any balls while keeping everything in motion at all times can distract you from what you are most passionate about, growing your business.
For many CEO’s, it’s tempting to think that you have to do everything, including managing the costs and spending of the business. You definitely need to understand your company’s cash burn, but setting up your financial processes and building a solid approach to expense management from the beginning, will help set the foundations for a successful business.
We’ve put this guide together so you can spend less time worrying about the details of your business’s costs and get back to what you love doing, growing your business.
Expense management is the way a business thinks about and keeps track of expenses, from deciding how much should be spent to approving, reporting, and auditing all business activity expenditure.
Keeping your spending organised has multiple benefits for your business. It helps you stay legally compliant, allows you to improve business’s financial health by having an accurate view of expenditure, and you can develop better supplier relationships thanks to having a more accurate view of the supplies your business needs. You can also use this information to improve your products and services by knowing where you can safely redirect spending while maintaining overall business operations.
Spend management isn’t only an issue for large companies with sprawling and complex accounts. Small businesses need it too. When you’re working to a tight budget, which has been further squeezed by COVID-19, then any savings can have a huge impact on the overall financial health of your business.
Staying on top of your business expenses can mean making many potential gains for your small business as a whole.
Some practical tips of what you can start doing today include:
As a founder, you will need to have a solid understanding of how much money you need to get your business off the ground. What type of services or costs will you need to build your business.
You don’t need to be an accountant to build a simple budget, but this exercise is invaluable to understand where to deploy the funds you have (or plan to have in the future) and how quickly these costs, particularly SaaS products, can add up across the business. Understanding your budget also gives you a benchmark to track your actual spending.
Create an expense policy - make sure there’s clear expectations on what is and isn’t an acceptable expense. Setting expectations early on means that your expenses culture will be baked into the company from the beginning.
A simple process clarifying how expenses are going to be paid and reimbursed - where do you keep receipts, how receipts are submitted, deciding how supplier invoices are paid. Making these decisions early on will create clarity over expenditure and sets the tone for how expenditure is handled in the business.
Set up some basics to help ensure your team avoids confusion and save time overall.
Get into the habit of keeping an audit trail of every expense payment made as well as the proof of purchase such as the receipt or invoice as early as possible. Keeping a close eye on how expenses are used and enforcing this policy will make it easier for you to understand how money is being spent.
From here, you will want to itemize and categorise all of your expenses, doing that will allow you to keep a birds-eye view of company expenditure. This will be vital data for creating a cash flow statement and forecast.
Having a cash flow statement and forecast will allow you to see how your expenses stack up against your income and guide your spending decisions going forward.
If you’re beginning your startup journey with a finance team that consists of only yourself, then taking responsibility for managing your businesses expenditure and income may not be a challenge. However, as you start to grow your revenue or receive a capital injection from elsewhere, you’ll want to consider hiring dedicated finance professionals to support you. Basic accounting can be done alone but nothing can compare with having a real accountant to help you steer past issues with the Australian Taxation Office and better manage your cash flow.
More importantly, hiring someone frees you up from the time sink associated with all of the tedious data entry work required to reconcile receipts and close your books at the end of the month. Time is your most valuable asset as a business and the more time you have back to focus on building out your product and acquiring new customers the better.
Digital transformation has changed how business works. That was true before the pandemic but since it hit and lockdowns have become part of our quarterly concerns being able to operate remotely is more important than ever.
You need to be able to monitor and manage potential fraud from employees. No-one likes to suspect their own staff but insider attacks account for most instances of major fraud that businesses suffer.
The financial services you choose to work with for your business need to have powerful fraud detection tools built-in from the start. Being able to surface suspicious financial activity in your business is key to identifying anyone who is trying to misappropriate funds from your company.
Simplifying and cutting through the hassle is essential. Expense management and cash flow are integral to your daily operations as a business but they’re also two of the most time-intensive activities. Being able to automate these processes and work from a topline view is key to both responsibly managing your business and reclaiming more time so you can work effectively at growing your company.