Startups desperately need cash. Though many startups are bare-bones business endeavors, with barely more than a handful of employees, many of which are working out of their homes, startups nonetheless need plenty of funding to acquire tools and equipment, develop strategies and processes, create and deliver marketing and perform other tasks that will serve as the foundation of the business as it grows.

Thus, it is of critical importance that entrepreneurs and their startup staff avoid critical spending mistakes that could drain savings accounts and leave the budding business without enough cash. Here are some of the worst spend management mistakes for startups and the most effective spend management solutions.

Buying Impulsively

Businesses use all sorts of tactics to trick consumers into making impulsive purchases. Some place intriguing or practical items close to checkout; others try to give buyers a sense of urgency with limited-time offers. Business leaders should be able to recognize these marketing strategies and control their spending to save their startup.

Every item an entrepreneur buys for their business should be perfectly planned for. This goes for major expenses, like machinery and vehicles, as well as small costs, like office supplies. As tempting as it might be to throw another pack of sticky notes on the checkout pile, entrepreneurs need to know for certain that their startup can afford every expense.

Ignoring Suppliers

Entrepreneurs should strive to develop strong, healthy relationships with their suppliers, which will provide benefits like better prices, access to new products, innovative ideas and greater flexibility. However, a supplier relationship does not need to be particularly friendly or in any way unprofessional. Some behaviors that lead to a bond between a business and a vendor include:

• Maintaining consistent communication
• Being honest
• Remembering names
• Paying on time
• Keeping records of payments
• Providing notice of upcoming orders
• Understanding supplier interests, such as objectives, purposes and missions
• Understanding supplier processes

Forgetting Transparency

It is easy for a startup to be transparent, as it is all but impossible to hide any business details when a business’s team members can be counted on one hand. Yet, as a business grows, it is imperative that business leaders and employees are as open as necessary when discussing issues related to spend management.

For example, procurement teams often need to work alongside other departments to understand what those departments require in terms of tools and supplies. If departments are not striving to be transparent with regards to their needs and wants, the startup could waste resources on items that do not contribute to business success. Additionally, startups should have a clear approval process for purchases, so every penny of spend can be properly accounted for.

Analyzing Poorly

Spend management is highly dependent on two resources: accurate reports and strong analysis skills. Unfortunately, it is easy for startups to lack both. Business leaders need to develop systems for ensuring that they have complete and accurate information about how the company is spending money. This means setting deadlines for expense reports and verifying those reports before making any spend strategy decisions. Additionally, business leaders need to be confident in their ability to analyze spend data; if entrepreneurs without this experience should hire talent they can trust with spend analysis, considering the importance of this task.

Neglecting Tools

Spend management is not a manual business task; in fact, often the more entrepreneurs can automate with regards to spend management, the better. There are all sorts of spend-related solutions that make it so much easier for startups to keep track of their expenses while managing other aspects of their growth. Some essential spend management tolls include:

• Real-time expense tracking
• Workflow automation
• Simple spend analysis
• AI insights
• Customizable payment options
• Document capture

There are plenty of startup mistakes that are more or less harmless, but spending mistakes cause serious and lasting harm to business success. The sooner entrepreneurs can identify spend management mistakes and rectify them, the better chance they will have at avoiding business failure.