Nostalgia really has its hold on you. Lately, you’ve been having a lot of thoughts about the beginning. The days when your kitchen table was your office. Your girlfriend (you weren’t even married yet) helped you stuff checks in envelopes at night, while you called customers to confirm appointments for the next day. Those were the good ‘ole days!

It’s a far cry from where you sit today with a back office staff of 15 and a total headcount of over 100 people. You still like to be in the mix of everything that’s going on inside the company, but it has become literally impossible to know it all.

You’ve prided yourself on running a company that is anti-corporate. Long before you became a business owner you were a concert-going teen singing anthems against “the Man”. Times have changed, but you’ve never lost your allergy to formal processes and procedures, always preferring to rely on relationships and tribal knowledge.

But it’s just not working anymore. For the past year or more, you’ve realized that your organization has no effective expense control. You simply cannot approve every expenditure anymore without suffocating your business. On the other hand, without written policies, it seems that every month you get hit with an unexpected spending surprise. There must be a happy medium, right?

Process

The old adage goes: “If you fail to plan, you’re planning to fail.” In the case of spending, this is definitely true. In a prior post titled, “The Dreaded Budget”, I discussed the importance of the budgetary process as a tool. Extending this to expense control, a process must be in place to connect budgetary goals to actual spending activity.

What this means practically is that individuals involved in spending money must be informed of their budgets and be provided authority to control their spending. This can be handled by department, accounting codes, or any number of ways. It can be done through a purchase requisition and purchase order system, or something else. It just needs to be done.

If the individuals spending the money don’t know what the budget is and have no mechanism for managing their budget, 9 times out of 10 they’ll overspend.

Accountability

Setting up a process is just the first step. As you know, your business is littered with well-intended initiatives that have been cast aside. Some companies churn through processes at record speed jumping from fad to fad (so-called “flavors of the month”). Everyone follows the new process for a little while and then moves on. The necessary changes don’t take hold. In other organizations, the processes are adhered to, but merely as a formality. You don’t want to be like this.

So how do you avoid creating a “flavor-of-the-month” scenario, or a “rubber stamp” process? The answer is simple: accountability. The trick is how to create it. One way involves social pressure by measuring and discussing results regularly together with key managers. This can take many forms, but it’s critical to have a consistent focus on clear objectives.

If you’ve never done something like this before or have experienced some failed attempts in the past, it may be worth consulting a professional. At Doescher Group, we work with business owners on projects like this all the time. Does your Company have a spending problem? Reach out to Doescher Group for help.