When Business Is Booming, Should Spending Change?

When Business Is Booming, Should Spending Change?

You hear talk of “tightening our belts” when business is slow. That makes sense because less cash flow means you have to pay special attention to where your money is going. But when things are going well and business is booming…

You should still tighten your belt. Just cause your business can afford to replace equipment it bought last year, that doesn’t mean it needs to or should. Paying close attention to finances during the good times can prevent you from having to make drastic decisions when business is slow or the economy is in a slump. Here are some ways that your business spending should change to help prevent a disaster.

Save More When Business is Good

When business is going well, you might be tempted to make purchases you don’t really need or doing something else “just because.” In actuality, when business is booming, your savings accounts should be getting fatter.

This is a good time to shore up your savings and take a good look at your investments. If you want to buy something, aim for an investment that will add to your bottom line. If you add to your savings now, if things get tough, they won’t be too tough on you, because you’ll have a nest egg to fall back on. And this goes for both your business and your personal finances.

Sales Are Good Even If You Don’t Need Them

Okay, so maybe you can afford to pay top dollar for a table saw. That doesn’t mean you should pay top dollar for it. Sales are wonderful things. They allow you to get the same items for less money.

Unless it’s a dire emergency, keep an eye on the price of the equipment and wait for it to go on sale. You’re still getting the equipment you want – you just aren’t paying as much for it. The extra can go into the accounts mentioned above.

Don’t Run Up the Credit Cards

When things are going well, you might be tempted to put a big purchase on a credit card with the mindset of, “Things are fine, I’ll have no problems paying this off.” That’s just asking for the universe to look down at you and say, “Really? Hold my beer.”

If you can afford to pay the big-ticket item off in three months, just save the money and buy it with cash in three months. If you don’t want to wait that long, at least pay for the item partially with cash so you aren’t financing as much. If the economy goes south and business dies off a bit, you’ll be glad you have less to pay on the credit card.

But by All Means, Stock Up on Needed Items

One thing you can spend that extra dough on is supplies that you always need for your business. Buying office supplies in bulk such as toner, paper, pens, and notepads is never a bad idea. Other items that you go through regularly that you can buy in larger quantities and store are fair game too. You can even buy additional storage space, so you have the room for it all. If things get tight, at least you won’t have to worry about the printer running out of ink at the most inopportune time.

The moral to this story is this: Just because you have the money to blow, that doesn’t mean you should blow it. By all means, throw a party for your employees and maybe even send some of your top earners on a trip as a thank you. But always remember that what goes up, must come down, and it pays to be prepared for when that happens.