Seeing a business grow organically after years of hard work is a great feeling. However, finding out later on that all of that sweat ended up producing little to shareholders is not rewarding at all.
Startups and small businesses typically struggle to scale up their operations without sacrificing profitability at the same time. The reason for this is that, once a business starts growing, it gets more and more difficult to keep track of how money is spent and budgets end up being meaningless pieces of paper.
To help entrepreneurs, companies like Mesh Payments have developed spend management software that facilitates the task of managing a company’s finances. In this article, we explain how this kind of solution can help business owners in improving the bottom-line performance of their ventures.
#1 – Reducing budget variances
For entrepreneurs, it can be frustrating that none of the company’s annual or even monthly budgets are being met as that typically leads to volatile or negative profitability.
In most cases, the reason why actual results deviate from the established quotas is that there are no incentives for mid-level managers to keep their overhead in check.
That said, spend management software can help business owners in breaking down the company’s finances to a point that they can identify which areas are having the most influence on deviating the firm’s actual results from those forecasted. That would allow them to make timely corrections to steer the ship in the right direction.
#2 – Limiting the number of people of authorized to make payments
As a company grows, it gets more and more difficult for a founder to keep centralizing payments. However, in practice, delegating payments could lead to irrationally spending if strict policies or a proper workflow has not been established to review and approve every disbursement before it is made.
With this in mind, spend management platforms have created tools to give certain people the appropriate permissions to make payments for the company or request approval for a disbursement. These requests should be ultimately reviewed by someone who has the criteria to determine if the amount to be spent is in line with the company’s financial goals and policies.
#3 – Cashing in on the rewards offered by credit card companies
Most financial institutions and credit card companies offer rewards for using their payment instruments to incentivize customers. These rewards can come in the form of store-specific discounts, special deals for certain purchases, and even cash-back offers.
Through spend management software, owners can identify and prioritize the use of the payment methods that are offering the most attractive rewards to generate some extra income for the business or save money.
#4 – Receive alerts for certain activities
The Pareto principle works perfectly to explain how spend management could be optimized in a growing organization. In most cases, 20% of the concepts account for 80% of the business’s spending and those are the kind of payments that managers will probably like to keep an eye on regularly.
Spend management solutions have incorporated alerts and notifications to their systems to inform business owners of irregular spending patterns or individual disbursements that exceeded a certain pre-established quota.
These alerts can help managers in stopping or revisiting a certain payment before it is made to make sure that rational spending policies are being followed by those in charge of requesting and authorizing transactions on behalf of the company.
#5 – Checking everything on the go
Most entrepreneurs have to wear multiple hats when a business is growing whether that is because the company cannot afford to hire more people yet or due to the mission-critical nature of certain activities.
Considering how busy business owners can be, spend management platforms have developed mobile apps that are highly user-friendly and intuitive to help them in approving payments and checking on relevant spending reports on the go by using their smartphones.
Bottom line
Growing a business takes a lot of time and effort that are better invested if the company is capable of turning sales into profits.
Spend management platforms aim to facilitate the process of keeping track of where the money is going regardless of the size of the organization by limiting who is allowed to make payments on behalf of the business, identifying potential money drains, and taking advantage of the perks offered by payments companies.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes