SMBs survive on limited resources. As a result, they need to ensure their financial habits keep evolving through the new market dynamics. With the pandemic causing over 140,104 companies to close their doors, SMBs have begun realizing that every dollar needs to be accounted for if they’re looking to sustain through these unprecedented times.
While it’s true that some overspending mistakes are a common occurrence, if left unchecked, even the less dangerous ones could lead to severe pitfalls. Thus, to help SMBs navigate these traps, we’ve crafted this article that covers some of the best strategies to employ to avoid overspending in 2022. So, let’s dig in!
Strategy 1: Rethink your hiring strategy
Hiring new talent means your existing team members would need to put in serious effort over multiple hours to assist the newly hired in adapting to your company’s culture and processes.
Additionally, there could be instances where a freelancer could do a better job than a full-time hire. Thus, SMBs need to be entirely sure that they’re in real need of an extra helping hand before they open a position for hiring.
Business owners and HRs must understand that mistakes in this process would result in a great deal of wasted time, effort, and money, along with unhappy employees and sometimes even bad company reviews. Hence they must ensure to tackle these problems with care.
Some pointers for hiring teams to look into:
- Can current employees manage their existing work through a reshuffle of priorities and projects?
- Could outsourcing be a better solution than having to hire someone new?
- How many people would be needed to hire for a particular position?
- What does the workload of the newly hired look like in the coming quarter?
- Do you have a growth plan for the newly hired to adapt to their roles successfully?
P.S. Start with a plan in mind before you hire; these are some of the most common recurring costs that your business can easily avoid by reevaluating the scenario before diving headfirst.
Strategy 2: Pick an office setup that fits your budget
Let go of the old belief that large offices directly result in successful businesses. Instead, experts suggest that the average office rent should be somewhere between 2 to 20 percent of your business’s income.
Based on this analysis, if you recognize that you are overspending for your current office space, you can save up on these expenses and utilize them on things that boost employee productivity.
Quick tips for businesses to choose the perfect office setup:
- Accurately analyze the cost of your current office space and evaluate if your business is underspending or overspending.
- If you find out that you are overspending on your current office space, look for potential areas where you can control or cut these costs.
- Understand your employee mindset to know what types of cost cuts they would prefer and why.
- Once you have these insights, list out the possible changes that are needed and what they might mean for your business.
- Ensure employees are always in the loop while working from home or in the office to ensure a smooth transition.
Strategy 3: Ensure your marketing teams know where they spend
Playing around with your marketing plans is a close second to playing with fire, one little mistake, and it will turn all your finances to ashes. Therefore, SMBs must place the utmost care and attention while drafting their marketing plans and budgets.
SMBs need to understand their niche, who they’re targeting, their ideal buyer personas, USP, and more to pull off a successful marketing campaign. So always ensure your marketing team has spent enough time pondering these data points before diving headfirst into the campaign.
Quick tips to avoid falling into the marketing trap:
- Ensure that there is sufficient data to back every decision made by the marketing team from customer acquisition to retention.
- Analyze competitor strategies and look for indicators to decide whether to proceed with or tank your current plan.
- Set and monitor realistic budgets while also mapping projected and actual outcome numbers to evaluate whether the money spent was well-worth the endeavor.
Strategy 4: Gain complete control over all business expenses
Expenses are unavoidable for any business. From food or travel reimbursements to technology subscriptions, they’re all over the place. What needs to be noted here is that every department has separate business expenses under various cost centers and budgets. While managing these expenses manually in an office setup was difficult but manageable, going remote has made it difficult for Finance teams by giving them little or no control over the process.
Additionally, with no overview of business expenses across departments, budgets, and cost centers, Finance teams cannot have enough insights to recognize cost-cutting mechanisms. This can mean financial leaks that could hurt your business finances in the long run.
Quick tips to efficiently manage business expenses:
- SMBs can shift to an expense management software to efficiently manage the entire expense management process.
- This could automate policy compliance, simplify expense reporting while also significantly reduce the TAT for reimbursements.
- SMBs can use real-time insights in the expense report software to monitor department-wise spends and also note where overspending is happening.
- Finance teams can use this data to revise expense policies, budgets and also control business expenses with no additional effort.
Strategy 5: Leverageing technology to do the heavy lifting
A common misconception SMBs have is that technology is costly and would hinder existing processes. But this isn’t true.
A recent Zapier survey revealed that 96% of companies have benefitted from automation, while 43% of employees have agreed that it enables them to complete their tasks faster.
Given the current global scenario, with distributed teams across states, countries, or even continents, staying connected becomes pivotal for SMBs to get their tasks done. However, businesses can only achieve this by rapidly adopting and adapting to innovative technologies to automate tedious business processes.
Quick tips on adopting the right technology:
- Gain an understanding of all the current processes that need fixing – this roughly translates to any process that would require your employees to dedicate considerable time and effort with zero rewards. Start from there.
- Once you have a list of all such processes, make a list of automation technologies that help automate all the redundant, tedious, and error-prone activities.
- Test run 3-4 software along with their competitors to understand which one aptly suits the needs of your business.
- Finally, ensure that your employee’s problems are genuinely being addressed and that they can make the transition smoothly without it affecting their work.
Conclusion
While incurring expenses is part and parcel of running an SMB, keeping track of whether your business is overspending can make all the difference in determining your sustenance through these changing times.
While we all struggle to make peace with the new normal, an expense software can often ensure that your business is well-equipped to deal with the next.