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 Small Business Owners Can Learn from Larger Ones If you are a small business owner and you want your business to grow, it often helps to take a lesson from businesses with larger operations. In July 2001, American Express conducted in-depth interviews with financial executives at mid-sized companies. What the interviewers learned during those discussions is instructive. One thing was this: In good times or bad, companies can positively impact their bottom lines by exercising better discipline over the way they manage general office expenses. For example, by graduating from a cash system to one that uses a plastic payment product, they can cut administrative costs and establish better control over expenditures. Here are some tips that should also be helpful for small business owners trying to contain costs, lighten the accounting burden in-house, and provide a basis for monitoring spending data in the future. First, establish policies: Research current spending patterns: As you look back on your purchasing activities, focus on everyday business spending, including maintenance costs, general supplies and travel. Reports from corporate charge/credit cards are an excellent source of data. Listen to the experts: Contact professional associations, card issuers and travel agencies for examples of typical travel and purchasing policies. Adapt policy to your culture: Convene a cross-functional group from outside or within your company, with expertise in finance, accounting, purchasing, human resources and facilities management. Work together to formulate a policy tailored to your business. Mandate and communicate policy: Mandate compliance by explaining the policy throughout your organization. Then, eliminate cash transactions: Assess your cash usage: Quantify the petty cash spent for office needs and cash advances for out-of-town expenses, as well as the time spent tracking it. Analyze cost of the float: Add up the costs of outstanding cash balances, as well as the cost of maintaining records and providing security for a cash operation. Consult with security experts: Consider liability and safety issues associated with sending employees out of the office with cash in hand. Substitute plastic for paper: Institute a corporate card program as an easier and safer way to track spending with vendors and monitor compliance with policies. Review reports: Corporate cards provide a company-wide view of spending. Review them monthly to make sure employees are complying with policies. Notify employees when policies are not being followed, and reward them for changing behavior. Spot trends: Designate a card administrator to monitor spending patterns, cancel or issue new cards and reduce delinquencies. January 17, 2002
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