Spend visibility is a challenge that every small business owner faces. The ability to see where money is being spent is critical for budgeting and tax filings. Spend visibility is unobstructed when you’re a sole proprietor with just a few employees. Your view might not be as clear when the company starts to grow. Like other components of your infrastructure, it needs to scale as you expand your organization. Here are six ways to make sure that happens.
Step 1: Upgrade Your Accounting Techniques
Startups often use their checkbook ledger and credit card statements to keep records of their spending. Reconciliation is done monthly to ensure nothing has been missed and paper receipts are kept as a backup in case the company is audited. It’s manual, it’s messy, and it’s the least favorite way your accountant wants to receive those records when it comes time to file taxes.
The first step in increasing spend visibility is to upgrade your accounting techniques. Invest in some quality accounting software like QuickBooks Online or Xero. These applications can be connected to your bank account and credit cards to track and categorize spending as it happens. They’ll also generate P&L statements and calculate estimated tax deposits.
Step 2: Integrate Your Systems With Standardized Data
Data standardization, despite technological advances in almost every area of business, is still a challenge during the growth process. This is particularly true when your business is absorbing other companies that already have systems and processes in place. Their data may not be compatible with yours. That’s a problem that needs to get solved.
The most effective way to do this is to replace their systems with your own, but that can be costly. Another option is to look for workarounds, particularly with software integrations. Platforms like Zapier can provide API connections between software applications that don’t normally connect. Focus on those that give you insights on your spending.
Step 3: Familiarize Yourself With Data Analytics
The answers you seek are in the data. The challenge is understanding how to read and analyze that data. Business owners who delegate this task lose valuable perspective on their business operations. You can leave the serious numbers crunching to the experts, but you should familiarize yourself with data analytics and how they can be used to increase profitability.
A good example of this is expense reporting. Larger companies allow departments and salespeople to track their own expenses and submit reports for reimbursement each month. Those expenses should be categorized properly and approved based on expense policies set up by the company. Data analytics can tell you if that’s happening.
Step 4: Eliminate Manual Processes
Human beings, no matter how well-trained they are, make mistakes. Leaving manual processes in place increases the chances of human errors. That could be something harmless, like forgetting to buy enough paperclips, or it could be a crucial accounting error that causes a crippling domino effect. You might not see the latter until it’s too late.
Automating your accounting processes eliminates the possibility of mistakes and gives you better spending visibility. You can take this a step further by installing a spend management system like Ramp or Mesh Payments. These platforms automatically track spending, give you real-time insights on cash outflows, and connect with your accounting software.
Step 5: Modify Your Budgeting Process
Managing a larger company is simpler when departments and satellite offices have a certain level of autonomy. Providing them with a budget that they can manage independently can take some of the pressure of ownership and the accounting team. That process has worked well for decades. Modern technology has made it obsolete.
Spend management and accounting software can be used to track expenses in any time zone across any international border. It’s okay to give a department head or offsite manager a budget to work with, but the management and modifications to that budget can be done from your office. That gives you better spending visibility and control over cash outflows.
Step 6: Make Spending Changes In Real-time
Quarterly reports are great for updating your shareholders. They won’t help you with spending visibility. Those reports are compiled after months of corporate spending that may or may not have been profitable for the company. Successful businesses use real-time data to make spending changes in real-time. This helps them to be more efficient.
You can’t stop the bleeding if you’ve already bled out. Companies that can’t see their spending in real-time run this risk. The technology is available to set up real-time tracking. Transactions can be categorized and fed to an accounting system to make tax filings easier and more accurate. Put these two pieces together and your company will profit from them.
The Bottom Line
Spend visibility is unobstructed when a company is in the startup or sole proprietor stage of its existence. That visibility becomes more challenging as a company grows. The addition of new departments or satellite locations makes it more difficult to see cash outflows. Thankfully, there are steps you can take to improve your spending visibility, like adding new technology.
Begin by adding new accounting software like QuickBooks or Xero. Make sure all systems feeding into that accounting software are providing standardized data and learn how to read the data analytics. You can improve spend visibility further by incorporating spend management software and modifying how you manage budgets.
The most important element of this is the ability to track spending in real-time. The software to do this is available. You just need to install and integrate it with your other systems. This may require some additional research on your part, but it’s worth it. Enhanced spending visibility and being able to make cash flow changes in real-time will increase your company’s chances for success.
If you want to learn more, reach out today to schedule a consultation and start the path to better growth for your business with D&M Accounting.