The illusion of cost control

24th November 2021

“It cost me a fortune!”

A business associate of mine was incredulous.

A few weeks ago, she’d told her 10-year-old that he could order a particular toy from Amazon.

But the kid had apparently taken that as blanket consent to buy whatever he liked, and ordered a whole range of goodies - amounting to £370.

She only realised there was a problem when she checked her email account, and saw nearly a dozen notifications from Amazon that a purchase had been made. By then, the packages had already started piling up by the door...

Fortunately, there’s a happy ending to this story. Everything could be returned or cancelled and the mum can laugh about it now - just about!

But her tale immediately made me think about business owners...

...And what they can learn from her experience, about controlling business costs.

You see, this mum thought that she was in control of her Amazon account. She had notifications sent to her whenever a purchase was made, so she could keep an eye on what her kids (not just the 10-year-old) were buying with her money.

But by the time those emails reached her, the purchases had already been made. She was just approving or disapproving in hindsight.

When one child went overboard with his purchases, all she could do was shut the stable door after the horse had bolted.

Lots of business owners control their costs in a similar manner.

Perhaps you insist on signing off every single invoice yourself - it’s quite common!

This gives you the feeling that you have the final word on the money your company is spending.

The problem is, by the time you trawl through that pile of invoices, it’s too late.

Someone, earlier, has already signed a purchase order... Your company is already committed to the buy...

...You’re just rubber stamping it.

Your control, in short, is an illusion.

If you really want to control your company’s expenses, you need a system to approve purchase orders before they’re issued.

There must be clarity around who has the authority to issue these purchase orders, how much they’re allowed to spend and what they can spend your money on.

And if you want direct oversight, that’s the point at which you need to step in.

Now, you may have had a system like that in the past.

What we’re seeing in many companies is that some of these financial controls have loosened during COVID. It’s simply harder to manage and keep track of your expenses, with people working from home or from different locations.

But now that the immediate crisis is over, you need to re-instate strict financial controls (or put them in place if you’ve never had them).

If you don’t, your expenses can spiral out of control, cutting into your profit margins and possibly even eliminating your profit altogether.

It seems a shame to throw away your money for no reason, simply because no one’s set up an efficient way to approve your team’s spending, right?

This is where we can help you.

We’re experts at helping companies set up robust financial systems and processes, so your money is well-managed at all times. Controlling expenses is one of the basic, first systems we put in place.

Grown-up, mature businesses take these systems for granted - because you can’t run and grow a company easily, if your money’s in a mess.

And you too should have these systems in place by the time you’re turning over £1 million - £2 million, if you’re anxious to grow.

If that’s something you’d like for your business, get in touch with me today. Simply email me, or call us on 01279 647 447. I’ll get right back to you.

Looking forward to hearing from you.


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