The year has come and gone – it’s almost already December. So what have you learnt as a business owner when it comes to spending money this year? It’s time to find out…
By Craig Falck for Africa Report
Photograph: © Geckly | Dreamstime.com
Okay, so December isn’t quite the business year end. That doesn’t mean that you can’t look back at 2011 and scrutinise those all-important expenses… you know, the ones that involved money going out of your business, that you’d like to cut back on, that could mean a bigger profit if only you knew how to better manage them?
The first step in analysing anything is to make a list. That’s right… draw up a table that lists each and every expense item that your business enterprise has bought during the year. Once that list is drawn up, it’s time to split them into their various categories, such as current expenses, sundries, production, long-term expenses, etc. Each enterprise will have different categories, but it’s important, no matter what your business, that you split them up. This will make it easier to assess them separately and as a group.
Once you have sorted out the endless list of expenses, it’s time to take a magnifying glass, a fine-tooth comb and an axe. Basically what this stage of the game is for is to assess which of the year’s expenses were justified and which were complete wastes of money. Using your magnifying glass, identify those expenses that were uncalled for. Then take the axe and chop them out of the list, putting them on a new list labelled “waste”. Now take the fine-tooth comb and scrutinise whatever expenses have been left over from the culling. It’s important to go through these to see where you will be able to tighten the purse strings in 2012 and save yourself some money. If you find that during the year you’ve bought 20 items of a certain product and you’re still left with 8, it makes sense that you won’t have to buy 20 next year. Instead, work on a budget of 12 for 2012, of which you already have 8 on hand. That means that all things being equal (which rarely happens in business), you will only need to buy 4 items for the next year. That means a current saving of 8 units, and seeing as how life and work is becoming more expensive, this is a big saving.
When it comes to expenditure, less is best. A business needs to make money in order to exist, and this cannot happen when money is flowing out on unnecessary items. By analysing your expenditure, you will be able to understand where you have spent money wisely and where you’ve basically poured it down the drain. By going through your expenditure, you will be able to save much-needed funds for you business, and perhaps even your job.
