If you’ve ever invested money, been on a spending spree or even gone grocery shopping, chances are you’ve experienced the thrill of splurging. But as exciting as it can be to hit the upmarket café for an afternoon latte, or the boutique for a night out on the town; these experiences are nothing compared to what happens when those splurges turn into debts. A credit card is simply a piece of plastic that grants its user access to cash via a credit card machine. The more credit cards you have, the more money you can spend without worrying about running out of funds or being exposed to high interest charges. This can be great if you’re an occasional splurge who wants to pump the breaks and limit your spending over weekends and social events.
However, for some people, having too many cards is like putting coals in your pocket: they end up distracting them from their primary focus which is actually getting things done. If this describes you, then consider yourself warned: managing your money responsibly requires discipline and sacrifice.
Expense management is one of the most important skills for any business owner because how you spend your money dictates how long you stay in business.
Avoid Debt by Only Spending What You’re Necessary
It’s human nature to want to borrow money from the people we love, but in order to grow your business and make a profit, you must ensure that your expenses are kept in check. Ideally, you would never borrow money for any purpose, but in the unlikely event that something unexpected arises and you’re short of cash, a credit card can be used as a short-term loan. Credit cards come with a standard interest rate and monthly fee that you will be charged if you don’t pay off the debt in full.
This fee is charged even if you make only the minimum payment. In other words, the interest you pay is even worse than the interest that your lender will charge you. If you do end up using a credit card, the most important thing you can do is make sure that you only spend what you need to in order to pay off the debt.
Track Your Spending and Use Credit Cards Wisely
Many people make the mistake of tracking all their expenses and then feeling pressure to overspend because they don’t have any money left over. This is a major no-no in business because it can lead to stress, anxiety, and a loss of focus. It’s better to overplan than to underplan. This means that you should plan for expenses rather than just having money left over at the end of the month.
Having a budget can help you stay on track and avoid running out of funds because you know how much money you have left over at the end of the month.
Know the Exceptions to cut Down on Expenses
Some expenses are completely necessary to stay in business. For example, your property insurance will likely cost you more than your vacation home in Cabo, but that’s a reasonable price to pay if your business is successful. Other expenses, however, are really any expenses that are not necessary to stay in business.
For example, you can easily overspend while on vacation because you don’t have any expenses that you need to keep tracked or controlled. You can also overspend while you’re at home because you don’t have any expenses that you need to keep track of while you’re at home. You need to identify what expenses are necessary and which ones are not. Then, you need to cut down on the unnecessary expenses that are keeping you from living the life that you want.
How to Achieve Expense Management Success
To achieve expense management success, you need to keep a close eye on all your spending. This will help you identify unnecessary expenses and cut back on the ones that are necessary. Spend attention on your daily routine.
Are there any expenses that you’re not accurately tracking or bypassing on a daily basis? If so, cut those expenses out. If you can’t cut out every last expense, but rather identify which ones could be eliminated, then you can still achieve expense management success by prioritizing your expenses.
Wrapping Up
Your business may have a significant amount of money that is sitting in the bank earning interest or even making a profit. But to increase the amount of money you have available to use in the business, you need to figure out how to get it out of the bank and into your wallet. Expense management is the best way to do this.
Expense management is critical for any business owner who wants to keep their business profitable and in business for the long-term. Over time, as businesses grow and take on more staff, it becomes increasingly difficult for the owner to manage their operations and keep expenses under control. Expense management is a great way to reduce costs and increase cash flow for most businesses.
