KNOW YOUR BUSINESS TO GROW YOUR BUSINESS: Business Expenses

Lori Kudish, President of LTL Financial Consultants, reports: I want to talk this month about planning for and monitoring your business expenses. It is very important to sit down when you are getting ready to start your business and think about where you will be spending your money. Whether you are spending your start up funds or your first income, it will help you to start out with a basic blueprint of where your money will go. Understanding that you will need to make adjustments as you go along, you still need to go through the process of forming your plan. This will keep you focused, and allow you to see where you are varying from the budget.

If you have a product business you will need to take into account the costs for beginning inventory and remember that you may not get credit from your vendors right away. Whether you have a product or service business, you have basic operating expenses-office space, telephone, legal, insurance, promotional costs, travel etc. You need to think carefully about the particulars of your company, each one will have different needs. You may want to also factor in a miscellaneous category for all of the things that you can’t plan for. Remember that you will budget higher than you need for some things and lower for others. Hopefully in the end the plusses and minuses will balance out so that your overall expenses will stay under your budget.

Keeping business expenses within your budget can be the difference between success and failure. You can only know where your expenses are if you are monitoring them on a regular basis. This means tracking your expenditures, hopefully in some form of business software. There are several good options available and the costs will far outweigh the benefits in monitoring and reporting your business results. Monitoring your expenses is more than just entering numbers into a software program though. You need to sit down regularly-at least once a month, more often is better, and look at what you have spent money on over the last weeks. Ask yourself, did I spend what I expected, and on what I expected? What costs came my way that I did not anticipate? Also, is my income keeping pace so that I can maintain the same level of expenses as I planned? This exercise is such a crucial reality check that you cannot afford to skip it. Remember, you can’t plan for everything, but if you don’t plan at all, how can you tell if you are succeeding?

LTL Financial Consultants offers “CFO in a Box” services. Working with you to regain financial control of your company, we combine solid financial background, commercial lending experience, and first-hand knowledge of the challenges facing a growing business.

You can reach Lori Kudish, President of LTL at: lkudish@ltlconsults.com