Every dollar counts, especially with the pandemic bringing businesses down. The pandemic has altered industry patterns and consumer habits — forcing businesses to rethink their business decisions and strategies
To survive this, businesses need to ensure their finances and spending habits can adapt to the new evolving dynamics. Although some overspending mistakes are common, it’s often the less obvious ones that lead to dangerous pitfalls. This blog covers five significant overspending traps businesses need to avoid at all costs. We also provide alternative strategies companies can employ to mitigate and prevent overspending. So let’s get to it!
Overspending Trap 1: Quick and/or excess hiring
Hiring talent accounts for constant effort from existing team members to assist hires in understanding and adapting to your culture, processes, and workflows. This translates into serious effort put in by your existing employees to smoothen the transition.
There may be instances where a freelancer would do the job instead of a full-time hire. Hence businesses and hiring teams must be sure before they start hiring for a position. Bad hires or unplanned hires would result in wasted effort, unhappy employees, and money going down the drain.
Before hiring, ensure you have a plan in mind. These are high, recurring costs that your business can avoid simply by evaluating the scenario before diving into it.
Questions hiring teams need to ask themselves:
- Can existing employees manage their work with a reshuffling of tasks and priorities?
- Can outsourcing tasks be better than hiring someone new for the role?
- How many people will we need to hire for a particular department/role?
- What would their workload and contribution look like in the coming quarters?
- Do you have a growth chart for these new hires to grow into their roles successfully?
Overspending Trap 2: The wrong office setup
Large offices don’t always translate into successful businesses. So business owners need to let go of believing that a bigger office would serve their brand’s needs. Instead, it’s the product or service you offer that counts.
Experts suggest office rent should be anywhere between 2 to 20 percent of the business income. Based on this formula, analyze if you are currently overspending or underspending for an office space. Then, save up on these costs and utilize them on things that genuinely boost employee and financial performance.
Tips for businesses to settle on the perfect office accommodation:
- Analyze the current cost of setup and evaluate if your business is currently overspending or underspending.
- If overspending on a physical space, look into the potential options to cut or control these operational costs.
- Take a consensus of your employees to understand the current pulse of what they would prefer and why.
- Based on the insights, look into the possible changes needed and what they might mean for your employees.
- Keep your employees in the loop and ensure a smooth transition, be it work from home or a shared coworking space.
Overspending Trap 3: Poor marketing strategies
Playing with marketing plans is a lot like playing with fire; one wrong move, and it will literally burn through your finances. Hence businesses must ensure utmost care while planning out marketing budgets and campaigns.
Businesses need to understand their niche, ideal buyer personas, competition differentiators, and more to pull off a marketing campaign successfully. Therefore, ensure your Marketing team spends enough time on these data points before delving knee-deep into projects or campaigns.
How to ensure your business doesn’t fall into a marketing trap
- Ensure your Marketing team plans every stage of your customer acquisition, engagement, and retention strategies.
- Analyze competition and look for quantitative and qualitative indicators to either tank or go ahead with your strategies.
- Identify, analyze and apply relevant competitor marketing strategies to your business. Ensure constant documentation.
- Set and monitor budgets and outcomes for all marketing campaigns to ensure the money was worth the endeavor.
Overspending Trap 4: Not evaluating business expenses
Business expenses are unavoidable for a company. Be it food and travel reimbursements or just software subscriptions; they are everywhere. In addition, different departments have different business expenses under different cost centers or budgets. This makes it difficult for Finance teams to stay on top of these expenses manually.
Finance teams need a bird’s eye view of all business expenses across departments, cost centers, budgets, expense categories, and more. These insights provide Finance teams opportunities to control, cut, and save costs.
For instance, if your traveling employees often stay at the same hotel chain or use the same airlines, Travel managers can work with these chains for discounts and the best deals to save costs. But, on the other hand, no insight into these matters can pose a severe threat to your financial bottom line.
Tips for businesses to effectively manage their expense management:
- Businesses can use an expense management software to automate and streamline your company’s entire expense management process.
- An expense software simplifies expense reporting and reimbursements while automating compliance for all business expenses.
- Businesses can gain real-time insight into all department and category-wise expenses, top spenders and violators, and more.
- Finance teams can use these insights to revise expense policies, department and project budgets, negotiate new vendor deals and discounts.
- Finance teams can also leverage these data points to control, cut, and save on business expenses—all this and more, with little to no manual intervention or effort.
Overspending Trap 5: Not adapting to technology
A common misconception small businesses have is that technology is expensive. But this isn’t true. Take the instance of traditional expense management. Your employees and Finance teams deal with manual data entry, verification, approval, and reimbursement: all lengthy, tiresome, and highly error-prone tasks.
Yet, businesses and Finance teams have little insight into the state of their expense management process. Employees aren’t too happy either with filling lengthy expense reports and still being victims to delayed reimbursements. This calls for change.
In the current global context, with distributed teams across cities or even countries, it becomes vital for all businesses to stay connected to get the job done. However, companies can achieve this only with rapid and consistent adoption of innovation-driven technologies and software to automate business processes. Therefore, ensure your business doesn’t skip out on technology to enable your employees to do the job to their maximum potential.
How to start with giving technology-driven software a shot?
- Start with understanding which of your current processes need fixing – Any task that requires your employees to put in time and effort with no reward in return can be a good starting point.
- With a list of processes that need your immediate attention, come up with possible automation-driven technology to automate redundant, time-consuming, and error-prone tasks.
- Compare 3-4 competitor technology or software and use their “free trials” or “demos” to better understand their offerings. Analyze if they will be a good fit for your company’s needs.
- Run pilot tests with segments of your employees to understand if the software genuinely addresses their problems. Get their approval on the usage of new tech and software.
Incurring expenses is part and parcel of running a business. Hence, companies need to pay constant heed to whether they are underspending or overspending.
An easy and effective way to manage and track budgets and expenses is by switching to automated expense reporting. An automated expense software not only revolutionizes the way employees and Finance teams handle expense management but also helps businesses never lose track of their finances.