Every business incurs certain expenses before finally achieving a profit. Businesses that are developing on a large scale usually have a lot of capital to back them up in times of need. Even if they do not make a profit initially, the owners are able to keep their company financially stable. Businesses that are started on a much smaller scale are normally initiated with a limited amount of capital and hence, it is essential for the entrepreneur to manage his small business running costs.
Having determined that keeping a track of small business running costs is more important than large scale business expenses, you need to realize why it is necessary to keep a record of small business running costs.
Importance of Recording your Commercial Expenses
When you are struggling to keep your business afloat through limited finances, it is best to keep track of all the places where your money is being spent. Not only does it help to keep your business out of debt, but it also gives you an idea of where to increase or decrease your expenses in the future. In other words, having a clear idea of the small business running costs will help you to plan effectively for the future. You can even save excess money for use later on, but for that you need to have an accurate calculation of your expenses.
Once you have a record of your expenses, you become aware of the expenditures being made in each category and you can then mange your finances easily. For instance, if you are spending a lot of finances on an irrelevant item, you will only be able to discover it when you keep a track of your money. Eventually, you may want to lessen that unnecessary expense in favour of a more relevant one. Managing your small business running costs can also keep your business away from bankruptcy if you make wise decisions based on your expenses.
Types of Small Business Running Costs
There are many categories of small business running costs, i.e., those categories where expenses are made by small business owners, usually on a monthly basis. Some of these categories are:
• Taxes + Energy and Utility Bills:
A major part of small business running costs is the monthly bills and taxes that the owner has to pay for the use of various utilities and facilities. With the rising inflation, taxes and bills keep fluctuating each month, usually going higher and higher with time.
Small business running costs also include the salaries that you are paying to your staff. Having a lot of a staff for a small business often leads to idleness among the workers, resulting in wastage of your money.
• Office Supplies:
If you have an office space, you are going to need supplies for it. Supplies include stationery as well as furniture. Most office supplies are often a one-time expense but they are still certain supplies that need to be restocked every month. So office supplies are also a part of the monthly small business running costs.
• Advertising and Marketing:
Every business needs to make an expense on advertising and marketing to sell its products. Hence, small business running costs often include this expense as well. We sometimes forget how to reach our target audience and end up advertising our product in the wrong market. Choose you advertising campaign carefully to make sure it’s worth the expense.
• Travel and Employee Benefits:
If you to travel a lot for business meetings or if you have treated your employees to dinner in a 5-star restaurant, these expenses do not come out of your personal pocket. All such expenses are included into small business running costs when you record your outgoing flow of money.
• Repair and Maintenance:
Having an office also brings the overhead costs of maintaining it in proper condition. These maintenance charges are also included into small business running costs as all the repairs are carried out with the help of official finance.
How to Keep Track of Small Business Running Costs
The ideal way of keeping track of your business expenses is to make a record of all the expenses you are making, even if it is only of a few dollars. Record-keeping can be done is the following ways:
• Make a File:
If you have a lot of individual paper receipts that state your small business running costs, buy a log file that can be divided into 12 sections, one for each month. Keep a record of all your receipts in that file. If a receipt does not state where the expense was made, write that down along with it so that you know where and when the expense was made.
• Keep a Written Record:
Aside from filing the receipts, some business owners like to keep a traditional pencil and paper record of all their small business running costs. If you wish to keep a long lasting record of your finances, going the traditional way is not a bad idea. Having a backup of all your data is a good option, however, it can be quite time consuming.
• Use Software:
In this technological age, there are many types of software available that can help you keep track of your small business running costs. If you wish to keep a complete record, but find it too much of a hassle, find a software online or buy a software that can help you record your data, make your calculations and even estimate your taxes.
Managing your business expenses is vital for the success of your company. After discovering all the areas where expenditures are being made, you can calculate your total small business running costs, through careful record-keeping, using one or all of the ways given above.
A key point in managing expenses is to make the right decisions at the right time. For instance, if you are spending excessively on utility bills, you should consider alternative energy sources. Going green with sustainable energy is a not only beneficial for the environment, it is profitable for your pocket as well. Renewable energy, like Solar power, has taken the world by storm and companies like, True Value Solar, are doing their best to provide you with high quality products and services.
Solar energy is easy to maintain with a one-time installation cost, and you can easily dismiss the concept of fluctuating utility bills from your mind. So if you feel your small business running costs are getting out of hand, take control of the situation and make the right choice. Lessen your expenses through the use of Solar energy! At True Value Solar we can help you do just that!