Knowledge is power: and how to make the most of it
Expense management is one of a range of tools and techniques anyone in business can use to make a moderate business better and a good business great. But how do you make it work for you? Our simple guide explains how all sorts of knowledge gives you power over the destiny of your business…
Any engineer worth their salt will tell you: “Measure twice; cut once.” It was, and still is, the perfect piece of advice about getting it right. Take the man in our picture. That’s a complex piece of engineering he’s working on, and if it doesn’t fit, then the cost of modifying it, or worse still starting again, will be considerable – perhaps wiping out all of the potential profit from the work.
But it’s not all about measuring the physical dimensions of a product, obvious though that is. It’s about so much more. It’s about money management, expense management, and time management. It’s about customer relationship management, environmental management, and safety management. All of those things can be measured and quantified, even the things that might make you say: “We can’t measure that.” Solo Expenses would say you probably can, but that it’s just harder to find data for some things than it is for others.
Making informed decisions
Accept that point, and you’re well on the way to having the knowledge that gives you the power to make the right decision to take your business forward. Armed with quantifiable data you’re able to make informed decisions with a clear focus based on accurate information; to know if you can afford a new piece of equipment, perhaps, or if it’s worth taking on a further employee to deal with the new business a customer has offered you. In the latter case the thing to quantify is how long-term the business might be. If it’s going to cause an activity spike for a week or two, then it’s not worth creating another job opportunity. If it’s going to generate a regular flow of work for the foreseeable future, then it might be worth it. You’d have to crunch some numbers to find out the best way forward.
Equally, knowing the cost of your processes and premises is vital. How much raw material or finished stock do you hold? If it’s a lot, is it too much? Think of it not as stock in a warehouse, but as piles of money. Do you really need so much of your capital tied up in that way? How would you manage with less? Numbers would give you the answer.
Unlocking the power of numbers
Trouble is, just having a mass of data is not enough. To unlock its power you need to interpret it correctly; to understand how changing something at one part of the process can influence another, and act accordingly.
Take business expenses. Do you know how much you’re spending each week, or each month? If not, you’ have no idea how much of that money is being wasted, and could be put to better use. Free-to-download Solo Expenses Personal Use, the first expense manager app created for sole traders, will help corral all of that information, if you record it diligently enough. Tap in entries with the keypad, photograph receipts, or even create voice memos. It all happens on your phone, and from there can be used to create all sorts of reports, and even upload the information to your accountant, who will undoubtedly be well-placed to officer objective advice about how to take your business forward. He or she will be able to help you sort out the numbers that will help you to take your business to where you want it to be in five years’ time. Perhaps the answer is that you’d like to double the turnover, for example. OK. The next step would be to ask yourself what you’d need to do to make that happen. Would you need larger premises? Another production line? How much would those things cost? How would you pay for them? Are you even making the right product? Or are you selling the right product into the wrong market, so that changes in focus would increase profitability (and influence your turnover target)?
The answers to all of these questions are to be found in numbers, and all of those numbers will impact on each other as you travel towards your five-year horizon, calling for regular re-calculations as more and more data comes in.
To sum up…
Remember, numbers matter. Money management matters. Indian writer Shakuntala Devi, who died in 2013, said: “Without mathematics, there’s nothing you can do. Everything around you is mathematics. Everything around you is numbers.”