Learning to manage business expenses effectively is an important skill for any small business owner. Thankfully, there are many business expense strategies and technologies to help you minimise headaches — and stay one step ahead of bills and creditors.
Business expense management made simple
"If you don’t have a clear view of your expenses, your pricing won’t be accurate, putting your business profits at risk," says Michael Buckworth, managing partner of law firm Buckworths. “Businesses should start by putting together an estimate of expenses and a cash flow forecast,” he says. “Remember that, as your business grows, so do your expenses: If you hire another person, you might need additional software licenses or equipment,” he adds.
Which bills should I pay first?
If you’re wondering which business expenses to prioritise, remember that no two bills are created equal. Some can be deferred, some negotiated, and others won’t leave any room to budge.
Should you find yourself coming up short for the month, a good first step is to call creditors to negotiate a payment plan and make a minimum payment (if possible) in good faith. If you’ve been a good customer in the past, some will look to find practical ways to work together to help you navigate your way back.
Better2Know, a company that specialises in personal health tests, experienced a crash in revenue due to the unforeseen events of 2020. Finance director Anthea Morris prioritised payroll over other payments, such as HMRC bills that could be delayed without penalty. Fortunately, Better2Know switched to selling COVID-19 tests, and the company could pay its expenses on time.
Nevertheless, there were lessons learned. “It’s important to monitor expenses daily if you can,” says Morris. “Also, keep talking to your vendors. Even if you can’t pay, make sure they understand why and when you expect to be in a position to make that payment.”
It helps to prioritise business expenses payments, starting with the most important:
- Taxes: Payroll taxes, VAT and corporation taxes can be garnished, or business assets seized if taxes are left unpaid
- Payroll: People can be your most important asset, and it’s important to keep them paid
- Outstanding payables: Bills over 60 days due can incur significant interest penalties and put both your credit score and future financing capabilities at risk
- Rent and utilities: Prompt payment is important to keep the lights on and avoid eviction
- Key vendors: If you owe balances on outstanding inventory or services, it’s important to get them paid quickly to maintain inventory and preserve business relationships
- Secured debt: Any items you have personally guaranteed should be paid as quickly as possible before being repossessed
- Insurance premiums: Letting insurance lapse means taking unnecessary risks
- Unsecured debt: Outstanding sums require a court-ordered judgment or ruling before collection occurs. However, don’t forget that interest penalties and late fees can add up quickly
- Other expenses: Professional dues, advertising costs, nonessential maintenance, etc
The American Express® Business Gold Card offers up to 54-day payment terms¹, giving you greater flexibility in when you pay your business expenses. And you can earn 1 Membership Rewards® point,³ point on every full and eligible £1 spent, which can be redeemed as statement credit.
Smarter ways to save and manage business expenses
Worried you’re spending too many hours in front of a spreadsheet? A growing array of digital solutions can make business expense management, processing and tracking online payments simpler than ever. “Getting accounting software and using it regularly reduces the time and expense involved in expense management,” says Buckworth.
Better2Know uses accounting software, and it is useful for providing daily insight into expenses and gross profit margins, says Morris. “It also does inventory management so that we can track stock of things like instant at-home testing kits.”
These simple business expense strategies can help your business manage its money more effectively:
1. Automate payments
A growing number of online apps, software tools and technology solutions now allow you to offload routine bookkeeping tasks quickly and cost-effectively to artificially intelligent software helpers. These solutions (which are typically offered in pay-as-you-go or subscription format) can help you quickly balance your books, stay on top of common expenses, and see where money is coming from and going on a regular basis.
2. Go paperless
Many free and paid software apps allow you to reduce documentation and paperwork by scanning and uploading receipts, automating invoice processing and payment, and offloading expense collection and reimbursement to computerised assistants. Using them can help you keep more accurate records, share them instantaneously with colleagues, and reduce the need for physical document storage and manual review.
3. Renegotiate payment terms
Challenging times can present opportunities to renegotiate with suppliers, vendors and creditors who may find themselves in a similar situation. Reach out to your partners and look for ways to temporarily create more flexible payment plans or keep impending expenses at bay. For example, providers might elect to extend your credit and payment terms, offer deals and discounts on large purchases or lump-sum payments, or allow you to purchase goods in smaller quantities or at reduced prices. In any event, your first call should be to your creditors. Many of them simply want to get paid as well, and they’ll often be happy to work with you to find practical ways to draw down expenses and bring your accounts back to compliance.
4. Computerise inventory management
If you’re in the business of manufacturing, distributing, or reselling physical goods, numerous artificial intelligence (AI) and analytics tools can help you right-size inventory needs and predict how much stock to keep. These tools can help minimise expenses associated with overheads, shipping, and other common costs while also helping to avoid tying up funds in excess purchases.
5. Capitalise on cost savings
While you may prefer to sign up to access third-party services or goods in pay-as-you-go subscriptions, many vendors also provide significant discounts if you elect to sign up for annual or monthly service and subscription payments. Likewise, numerous vendors will also provide helpful price breaks on one-time purchases if you purchase goods or services in predefined quantities or make a larger down payment. Consider and calculate which payment options offer the greatest potential savings and how many vendors’ offerings you plan to use in the coming months.
As you can see, managing business expenses doesn’t have to be especially time-consuming, expensive, or difficult when you simply make a point to apply more ingenuity and forethought. It can potentially save you thousands (or tens of thousands) too.
1. If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card. The maximum payment period on purchases is up to 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date.
2. Membership Rewards points are earned on every full eligible £1 spent and charged, per transaction. Terms and conditions apply.
