
Hey there, fearless businesswomen!
Ever been blindsided by unexpected expenses in your business? Like a bolt out of the blue, a computer fails, you run out of supplies, or an unforeseen marketing opportunity pops up. Surprise costs can feel like uninvited guests crashing your perfectly planned business party.
Wouldn’t it be fantastic if we could anticipate some of these surprises, making our entrepreneurial journey a bit less bumpy? Meet your new secret weapon – Pre-Approved Spend! Think of it as the business equivalent of a crystal ball.
What Is Pre-Approved Spend Anyway?
To make sense of Pre-Approved Spend, let's envision your business budget as your superhero toolkit. Every tool (dollar) is valuable, and you want to utilize them wisely, right?
Pre-Approved Spend is essentially creating a plan of where and how you'll use your tools. It's a promise you make to your business, stating, "I know I'll need to spend some of my resources on new software, routine maintenance, or maybe that team-building workshop." This promise prepares you for these upcoming costs, helping you navigate any surprise situations with grace.
Why Do We Need It?
Remember our surprise costs, the uninvited guests at your business party? Without preparation, these can create chaos, leading to unnecessary stress and hasty decisions.
You can imagine Pre-Approved Spend as your business’s crystal ball. You gain the power to see some of these surprises coming. We can prepare our toolkit, remain composed, and more easily ensure a comfortable cash flow journey.
Ever baked a batch of cookies only to realize halfway through that the recipe was for a crowd, and you're but a party of one? Sure, you love cookies, but there's a limit to how many you can eat before you start dreaming in chocolate chips. Just like cookie batches, your pre-approved spend needs to match your appetite, or in this case, your business needs. And, as those needs change, so should your pre-approved spend.
Shaking Things Up: The Need to Review and Adjust
Business, much like life, is not static. It evolves, and so should your pre-approved spend. It's a bit like a dance where you must adjust your steps to the rhythm of the music. By regularly reviewing and adjusting your plan, you keep it relevant and in sync with your business needs.
A Tale of Oversupply: Home Builder Supplies Inc.
Take our friends at Home Builder Supplies Inc., for instance. They've had a bit of a Goldilocks problem. They produce fantastic building supplies for personal homes, but their love for a sale often led to an oversupply of certain items. On the other hand, they found themselves short on the other necessary components to complete their production. A classic case of too much porridge, not enough bowls!
How to Harness the Power of Pre-Approved Spend
A. Forecast Your Needs
Forecasting your business needs is a bit like trying to predict the weather. You can't control the winds of change, but with some smart thinking and sharp tools, you can be prepared.
Let's go back to our client Home Builder Supplies Inc., a brilliant business that produces building supplies for cozy personal homes. Now, if you remember, they love a good sale as much as the next person. Who doesn't, right? So, when they see their components on sale, they dive in, stocking up like it's the end of the world. But here's where the acorns start falling out of the tree.
So, how do we guide our friends at Home Builder Supplies Inc. and indeed any business, to avoid overstocking their tree, or warehouse?
While our friends at Home Builder Supplies Inc. serve as a good example, the principle applies to all businesses. Whether you're selling handmade soaps, running a coffee shop, or providing consulting services, forecasting is your friend.
B. Create Your Plan:
A Master Pre-Approved Spend plan is like a trusty map guiding your business through the choppy seas of expenditure. It's based on your forecast of upcoming business needs, which could be anything from routine maintenance and supplies to new equipment and planned marketing activities. The key here is not to get dazzled by every passing ship (or sale!) and maintain a firm grip on the helm of your business.
Business, much like life, is not static. It evolves, and so should your pre-approved spend. It's a bit like a dance where you must adjust your steps to the rhythm of the music. By regularly reviewing and adjusting your plan, you keep it relevant and in sync with your business needs.
Take our friends at 'Home Builder Supplies Inc.', for instance. They've had a bit of a Goldilocks problem. They produce fantastic building supplies for personal homes, but their love for a sale often led to an oversupply of certain items. On the other hand, they found themselves short on the other necessary components to complete their production. A classic case of too much porridge, not enough bowls!
So, how can our Goldilocks, I mean, 'Home Builder Supplies Inc.', and indeed any business, ensure they find the 'just right' balance? Here are some tips:
Regular Check-ins: Regularly review your pre-approved spend plan. This isn't something you do once and forget. It's an ongoing process.
Adjust on the Go: Be ready to adjust your plan based on your reviews. It's like altering your dance steps when the DJ changes the beat.
Feedback Loop: Use the insights from your tracking system to inform your reviews. Remember, data is your friend.
While we've been focusing on a manufacturing company, these principles of reviewing and adjusting apply to any business. Whether you're running a bookshop, a yoga studio, or a cupcake bakery, keeping your pre-approved spend flexible and relevant is crucial.
Let's cast our gaze upon our friends at Home Builder Supplies Inc. They are a company close to our hearts, but one that kept getting too enthusiastic when they encountered sales. Their love for a bargain led them to overstock certain components while falling short on others, much like our sail-overloaded captain with his mast-less ship!
So, how can businesses like Home Builder Supplies Inc., and indeed any business, ensure they stay on the right course? Here are some handy navigational aids:
Sales vs. Needs: When faced with a sale, consider your needs first. A sale might make your eyes twinkle like a lighthouse, but remember - lighthouses are meant to warn ships, not attract them.
Balanced Inventory: Aim for a balanced inventory, where all components are available in the right quantity at the right time. A well-balanced ship sails smoothly, after all.
Pre-Approved Spend Plan: Decide on the amount you’re willing to spend on your forecasted needs and stick to it. This is your Master Pre-Approved Spend plan, the map that keeps your business ship on course.
As I keep saying, while we've focused on a manufacturing company, the principles of Pre-Approved Spend apply to any business. Whether you're captaining a restaurant, a clothing store, or a yoga studio, the Pre-Approved Spend plan can help you sail ahead with confidence.
C. Set up a Tracking System
Setting up a tracking system might sound like you're preparing for a space mission, but fear not, no astronaut training is required. Whether it's a simple spreadsheet or a more sophisticated accounting software feature, the goal is to have a system that helps you track your pre-approved expenses.
Let's return to our friends at Home Builder Supplies Inc. Remember we talked about how they got carried away during sales and overinvested in certain parts of their inventory. This leads to a surplus of one type of product, while the other pieces needed for production lag. It's like having a pizza party with an ocean of cheese but only one tomato. Pizza isn't quite pizza without the balance, right?
So, how can our pizza loving, I mean, building supply company, and indeed any business, avoid these financial detours? Here are some tracking tips:
Log Your Expenses: Note down all your pre-approved expenses as they happen. It’s easy to forget that extra topping, I mean, that extra expense, if not logged immediately.
Compare and Contrast: Regularly compare your actual expenses against your pre-approved spend plan. This will help you spot any patterns and adjust your plan accordingly.
Analyze Your Data: Use the data to gain insights into your spending habits. You might discover you've been spending way too much on novelty pizza cutters (or equivalent in your business).
While we've used a manufacturing company as our example, every business can benefit from setting up a tracking system. Whether you're running a pet salon, a bakery, or a tech startup, a financial tracking system is a must-have tool in your entrepreneurial backpack.
D. Review and Adjust
Business, much like life, is not static. It evolves, and so should your pre-approved spend. It's a bit like a dance where you must adjust your steps to the rhythm of the music. By regularly reviewing and adjusting your plan, you keep it relevant and in sync with your business needs.
Take our friends at Home Builder Supplies Inc', for instance. Remember, they've had a bit of a Goldilocks problem. They produce fantastic building supplies for personal homes, but their love for a sale often led to an oversupply of certain items. On the other hand, they found themselves short on the other necessary components to complete their production. A classic case of more TP than waist!
So, how can our Goldilocks, I mean, Home Builder Supplies Inc., and indeed any business, ensure they find the 'just right' balance? Here are some tips:
Regular Check-ins: Regularly review your pre-approved spend plan. This isn't something you do once and forget. It's an ongoing process.
Adjust on the Go: Be ready to adjust your plan based on your reviews. It's like altering your dance steps when the DJ changes the beat.
Feedback Loop: Use the insights from your tracking system to inform your reviews. Remember, data is your friend.
While we've been focusing on a manufacturing company, these principles of reviewing and adjusting apply to any business. Whether you're running a bookshop, a construction company, or a tool and die operation, keeping your pre-approved spend flexible and relevant is crucial.
Business, much like life, is not static. It evolves, and so should your pre-approved spend. It's a bit like a dance where you must adjust your steps to the rhythm of the music. By regularly reviewing and adjusting your plan, you keep it relevant and in sync with your business needs.
Again, our friends at Home Builder Supplies Inc., for instance. They had a long-standing compulsion of a Goldilocks problem. They produce fantastic building supplies for personal homes, but their love for a sale often led to an oversupply of certain items. On the other hand, they found themselves short on the other necessary components to complete their production. A classic case of too much porridge, not enough bowls!
So, how can our Goldilocks, I mean, Home Builder Supplies Inc., and indeed any business, ensure they find the 'just right' balance? Here are some tips:
Regular Check-ins: Regularly review your pre-approved spend plan. This isn't something you do once and forget. It's an ongoing process.
Adjust on the Go: Be ready to adjust your plan based on your reviews. It's like altering your dance steps when the DJ changes the beat.
Feedback Loop: Use the insights from your tracking system to inform your reviews. Remember, data is your friend.
Again, please realize, that while we've been focusing on a manufacturing company, these principles of reviewing and adjusting apply to any business.
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