As Inflation Heats Up, Here's How to Establish Company Spending Policies With 'Teeth'
Call it the yin and yang of a thriving small or mid-sized business. Company executives are focused on two primary areas: growing revenues and managing expenses.
Whether business is booming; growing at a manageable rate; or facing financial challenges, top executives know that without oversight and involvement, spending can easily spiral out of control, especially in today's ever-more-inflationary economy. By establishing spending policies that encompasses all company spending, it will stop the seemingly endless cycle of unapproved and over-the-limit expenses, or to empower more people to spend on behalf of the company without fear of losing control.
Consider the spending habits of many small and midsized companies. Spending occurs in every aspect of a business. It is not uncommon for individuals, departments and offices to purchase the same items from multiple vendors at varying costs, wait until the last minute to obtain airline tickets and submit expense reports with questionable items.
The finance team continually reminds everyone about obtaining approvals for purchases and booking travel through the preferred provider. But no matter how hard finance pushes, it seems as if the sales force thinks the Four Seasons is the only hotel in New York and employees continue to buy office supplies on an ad-hoc basis without care about costs.
One of the best ways to stop the seemingly endless cycle of unapproved and over-the-limit expenses or to empower more people to spend on behalf of the company without fear of losing control is to establish company spending policies. Without them, it is difficult to set boundaries and create controls, much less enforce them. Remember, every one percent decrease in operating costs has ten times the impact on profitability as a corresponding increase in revenue.