What is the difference between deliberate and impulsive spending?

For a business, just as it can be in a personal setting, managing your spending habits can be challenging. There is always going to be a way to cut any unnecessary costs, but you must just be slightly clever about it. This blog post covers the differences between essential and nonessential purchases.

Firstly, what is impulsive spending?

This is when you are making purchases that have not been budgeted for (or thought about fully), this is why having a budget plan that is set in stone is such a good idea for any size business – leaving no wiggle room. For smaller businesses, spending more than what is in your financial plan, can lead to significant issues, such as not being able to pay staff wages or your suppliers etc.

Step 1: make a budget plan.

A strong budget plan can help you to easily track everything that you are spending, this means if it is not in the plan, then you should not purchase it.

Step 2: emergency funds.

There may be some cases where you do need some extra funds. When creating your budget plan, make sure to include an extra pot of money just in case you need to cover any emergency expenses.

Step 3: have a two-step system when making a business purchase.

Make a list of any advantages and disadvantages before making a big purchase that could put you behind financially. Perhaps even ask for a second opinion if needed – maybe it is not essential right now and you could delay it for another month.

What is deliberate spending?

This is where planned purchases come in. This type of spending is the best way to manage your money – no matter what size business you are. It helps you to ensure all your money is accounted for and allows for profit margins to be clearly seen so your employees can be paid. It allows you to save money and helps to create a financial back up for emergencies.

What should I do next?

Make sure you have a spending plan in place – it is always handy to get some advice.

At Farnell Clarke, we can help you build accurate cash flow forecasting giving you total visibility of the cash situation and work with you to help you plan for the long term. This can be from purely using the information to gain a better understanding of your current situation to helping you understand the implications of your plans and providing expert guidance and advice to ensure you take the right steps forward.

Do not hesitate to get in touch with us here, at any time.

We also have a ‘budgeting tips for businesses’ blog post here, which may be helpful to you.