When you save money in the course of operations, does that have any impact on how much you place in your savings account? Do you put away a little every chance you get, or do you tend to ignore opportunities to preserve funds unless a significant amount is involved?
Do you follow strict rules when making purchases to ensure you don’t waste dollars? Strict budgeting might seem like more of a hassle than a plus, but it’s the best way to maximize your savings.
If you’ve been a little lax about your budgeting in the past, here are five reasons to tighten it up a bit.
1. Every dollar adds up
This is the most obvious reason to be strict with your budget, but it bears repeating. If you already know it, consider this a gentle reminder to be proactive and don’t ignore opportunities to save just because the dollar amount might be small.
Every tidy sum not spent adds up over time, and if you could save just $5,000 per year, that would come to $50,000 over the course of ten years. Among the most commonly missed opportunities to put away extra funds consist of small warranty reimbursements.
It’s a no-brainer to file a claim for a $1,000 repair bill, but a claim for $200 or less might seem far less urgent. Is it worth the time and effort?
The answer is yes, because those small reimbursements add up to larger quantities. It’s too easy to let such opportunities slip through the cracks, however, so the key is to track them with software in order to recognize when to file a claim.
You might be surprised to learn how much you can save just by tracking each contract and filing a claim for every repair that qualifies. For example, Heyl Truck Lines was able to increase their overall reimbursements by 990% just by using Cetaris.
That’s a significant increase from something as simple as using a software application. When you purchase a tool or a vehicle, you’re actually paying for the repairs covered in the warranty – that’s included in the cost. It makes sense to get your money’s worth no matter how small the fee.
2. You’ll identify more opportunities to save
Once you develop the habit of saving money, it becomes easier to spot further opportunities. For instance, let’s say you start by eliminating all the software subscriptions you never use, then consolidate several additional applications into one.
The next time you learn of an application that might help your business, you’ll be prepared to take a close look and evaluate your needs before springing for that new license or subscription.
When you’re more aware of the potential for wasted money, you’ll make more conservative purchase decisions.
3. Discernment about purchases quickly becomes a habit
If you’re a business owner, it’s your responsibility to make sure nobody in the company makes frivolous purchases. You need either to hire someone to oversee all purchase approvals or do it yourself.
If you’re not accustomed to evaluating each expense, the task can feel tedious. But once you get into the habit of doing it, this valuable practice may become second nature.
4. A tight budget prevents overspending
When you tighten up your company’s budget, you’re more likely to prevent team members from overspending. Think about how many people have the power to buy goods and services with the company credit card: The more employees who have this power, the greater the chances for waste expenditures.
The potential is multiplied if you set high limits for approval requirements. For example, if purchases under $200 don’t have to be pre-approved, and you have five people making purchase decisions, there’s a potential for a total of $1,000 a month or more in unnecessary expenses.
5. A tight budget forces you to define what’s important
When you don’t set a tight budget, you may also catch yourself acquiring items on a whim which may not benefit your business. If you don’t have a reason to be discerning about each purchase, you’re more likely to purchase more than you need and/or spring for the wrong things.
Maintaining a strict budget for purchases encourages serious judgments before you tap or hand over your credit card. Do you really need this item? How will it benefit your operations?
If you don’t know the answers, you’ll be more inclined to think it through and go ahead with a purchase once you’ve identified the potential ROI.
You can’t be too strict with your budget
You would have to work pretty hard to become too tight with your money, especially where software is concerned. Strict budgeting is how many successful businesses fund their projects without having to take out further loans or accept additional investors. You can profit from their example.
