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Guide to plan and control your SME’s expenses

04 Oct 2022. 10:22
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5 min.
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  • SME maturity
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    Scope to digitize
    1. Digital strategy

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Understanding and controlling your SME's income and expenses is essential to keep your business running smoothly on a day-to-day basis. As we know this may not be an easy task, we have put together a guide to help you get your company's finances under control.

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Descripción

SMEs are a key figure in the Spanish economy. According to data from the Ministry of Industry, Trade and Tourism, small and medium-sized companies account for 99.8% of companies in Spain, just over 62% of Gross Value Added (GVA) and 66% of total business employment.

In this context, to be able to understand and face part of the challenges that SMEs are currently facing is to ensure economic growth and the promotion of competitiveness in the country. For this reason, we have prepared in this post a series of steps and tips to take care of the financial health of your SME.

What is considered an expense and how does it differ from costs?

Before getting into the subject, it is essential to understand the difference between two concepts that, at first sight, may generate some confusion: expenses and costs.

First, costs are the value of the consumption of resources that have been necessary for the production of goods or services. This is, for example, the raw materials you use, employees' salaries, materials, etc.

On the other hand, expenses refer to the money allocated for your SME to carry out the day-to-day business activities. The expenses of an SME could be, among others, the rent of the premises, marketing, cleaning staff, office supplies, licenses, etc..

The main difference between cost and expense is that the former always has a direct impact on the direct production of goods while the latter has an impact on the general operation of the company.

With these basic concepts in mind, it is important that we understand why we should control our company's expenses, as this can avoid problems in the future. For this reason, we will tell you some of the advantages of controlling your SME's expenses:

  • Allows you to detect errors as well as unauthorized and unnecessary expenses.
  • Improves your bargaining power thanks to the knowledge of your SME's operational margins.
  • It greatly hinders the possibility of internal fraud.
  • Helps decision making.
  • Allows you to obtain more resources for staff training and innovation.

Tips for planning and controlling expenses

Implementing expense control in your SME can be a difficult task if you don't know how to start, so we are going to give you a series of steps to help you plan better. The first and most important thing is to understand the purpose of developing this plan in your company.

Cost and control planning aims to optimize the use of resources and costs associated with the internal production of your SME in order to generate the highest possible profit.

  1. Perform a complete analysis of your company's expenses. That is, how much, how and where the money is spent, from the most general to the most specific..
  2. Study the professional profiles of your employees and analyze what expenses they will be able to generate in programs, materials, tools, among others.
  3. Depending on your company's needs, implement more or less complex tools to help you manage your SME's expenses more efficiently and accurately.
  4. Understanding the general expenses of your business, the expenses of your employees and having a system that helps you manage all this data, we can create "usage profiles for each employee". These profiles will define the type of expenses, resources, working hours, among other factors that each profile requires to perform their tasks. In this way, we will have total control over the spending of each process.
  5. Continuously monitor the expenses generated by your SME in order to proactively make changes and adjust them if necessary.

To implement this control efficiently you can also rely on digital tools to facilitate the work. From well-known applications such as Excel or accounting programs, to more specialized tools such as ERPs. The use of technology can help you automate this process depending on the needs of your SME. Performing this expense control is key to know the proper functioning of a company.

As you can see, expense control is key to know the proper performance of a company. Moreover, controlling the expenses of an SME is a somewhat complex task, but very necessary. For this reason, we invite you to use technological tools that may help you save time and resources through the automation of processes

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