Many scaleup businesses face challenges managing their investment funds. Spend visibility helps to control and gain insight into their cash flow — all in real-time.
While there are plenty of tools available to help you track your financial health, most require manual input or complicated procedures. This means that your company has one more thing to do every month, which can be distracting and time-consuming.
As the founder, or the CFO of a scaling enterprise, how can you accurately monitor your metrics (e.g. Runway or Gross/Net Burn) for better decision-making? The answer lies in how you manage your business spend.
A spend management solution is an essential tool for any growing business or enterprise. It provides visibility into what the money is being spent on and by whom so that you can see where costs are rising or falling across different areas of your business. It allows for cost efficiency through automated spending rules or workflows – which can help reduce risk and save time as well as money. In other words, it provides the foundation for effective cash flow across all departments within your company.
The key to scaling up a business is to focus on the right metrics. And as the business expands, the demands on your investment funds will increase. Likewise, your manual control over those funds will also decrease. As a result, it becomes increasingly difficult to keep a handle on those investment funds – especially if they are spread across multiple different sources of capital. One way to manage this is through clever expense management tools that provide real-time visibility and control over how money is being spent.
Since most businesses are naturally focused on more revenue, it’s easy to lose sight of the money that’s already in, versus the money that needs to come in. The best way to support the growth of your scaleup business is by managing your current funds effectively. This can be achieved by having a strong understanding of where money is going and how much is being spent. This will, in turn, allow bootstrapped founders, CFOs, or finance managers to make more informed decisions about staffing levels, budgeting, and cash flow forecasting. At this point, your company will have a better understanding of the financial impact of its decisions and will act accordingly.
Forecasting your [cash runaway (the length of time the business has before it runs out of money) is crucial for your scaleup business. Use a spend management solution to calculate how much runway you have at any given time. This will help you plan and make decisions about how much capital to raise before running out of cash. It will also help you predict when you'll need additional funds, which can help reduce the risk of being caught short on cash.
So, your company has raised the funds. How can the Gross Burn — the total sum of cash your company spent on operations — be kept under control?
The simple answer is to have a system for monitoring and tracking expenses. This can be done by using global cards, corporate card controls, AP, and dedicated expense management software, all in one place. Many founders and CFOs still choose to use spreadsheets and other legacy tools. As it provides them with more flexibility and control over their cash flow projections. However, if you do this, you should also consider:
How often do you need to monitor your forecasts? If there is a lot of volatility in your cash flow (e.g., seasonal sales), then it may be worth having accurate systems in place to monitor your monthly or even weekly cash flow so that you can respond quickly to changes in market conditions or customer demand.
How detailed do you want your financial data to be? A simple summary of monthly expenses could include things like rent/office costs, travel expenses, etc., while a more detailed breakdown might include subcategories such as office supplies or utilities (electricity/gas).
Net Burn (also known as Burn Rate) — how much a company loses as cash reserves are depleted each month — enables you to anticipate your company’s financial future and limits the unexpected growth/collapse possibilities. There are many ways to spend cash, including paying fees, subscriptions, and vendor expenses. The CFOs or the finance team of a company should be tracking this activity in order to remain profitable and operational.
Payhawk provides a simple way to do that, by providing the necessary tools to track and monitor company spend. User-friendly interface that provides insights and analytics on a company's burn rate at any given time, making it easier for businesses to remain financially efficient. Along with easy-to-share reports with senior management and stakeholders.
Keeping track of the burn rate is one of the most important measures you need to take, to ensure your company will ultimately reach profitability. For startups, running lean and profitably matters. So if you want to succeed, you have to measure your net burn.
When you tap into Payhawk’s spend management solution, including corporate Visa cards, expense management software with in-built workflows, and AP, you can enhance your company’s profitability and efficiency. With one tool, you can make sure your team is equipped to pay for things that will help the business and optimise expenses to outperform your competition. You can get the clear-cut view required to understand which departments are over budget and how much capital you’ll have on hand to take your business to the next level.
As an all-in-one finance tool, you can gain the benefits of data capture with Payhawk’s ability to track and record spending in real-time — by integrating with existing accounting systems. You also get to identify savings opportunities through Payhawk’s spend analysis. This usually involves mapping against target markets, products, or geographies and identifying areas where savings can be made.
Also, by sharing up-to-date company reports with relevant stakeholders. This enables you to gain buy-in and establish a culture of transparency around spending decisions. Payhawk provides an easy way for businesses of all sizes to manage their cash flow by giving them access to real-time invoices, payments, and receipts. Empowering employees with the tools they need to spend smarter, control expenses, reduce late payments, and make better decisions with each dollar spent.
In truth, our full-service spending management solution helps businesses of all sizes manage employee expenses. Furthermore, with Payhawk’s smart expense management software, you can:
No matter the size of your organisation, or the amount of your funding, the right business spend and expense management tools offer important benefits. Giving you spend visibility over your cash flow, and allowing you to plan and strategise better for your next move. Plus, it controls costs, which is likely a top priority for your business as you look to continue to scale up.
A good business spend management solution will remove the struggles that come along with keeping up with a growing company's financial health. With proper management and reporting, you will be able to focus on running your company and hitting your milestones, rather than worrying about whether or not you have enough cash to continue operating — because you will know exactly how much money is coming in and going out of your business.
Ultimately, the goal is to have efficient and customisable expense policy tools to monitor and limit spend, set approval flows, and stay agile. This will allow you to make well-informed decisions when it comes to hiring, investing in inventory, and other business requirements. Thus, having a smart expense and spend management tool, will not only be the backbone of your finance team, but it is also often the difference between business success and failure.
If you’d like to discover the full benefits of our easy expense management system for better financial control for your company, book a demo today.
Trish Toovey works across the UK and US markets to craft content at Payhawk. Covering anything from ad copy to video scripting, Trish leans on a super varied background in copy and content creation for the finance, fashion, and travel industries.