there is a huge dilemma in our business world which is “PENNY WISE POUND FOOLISH” where many business owners and or the entrepreneurs are involved on a day to basis.
The company management will set policies for spending and necessary approvals for each payment on micro level perspective. A very stringent control will be devised to monitor each and every payment of this nature. the company will engage a team who will monitor these payments very closely for instance if the admin team is in need of buying stationery, then there will be several levels of reviews and approvals are sought, and it will take a very long time to get the work done. conversely the same management will be very ignorant and reckless in the activities and or spending of larghe nature in the business.
The management and or the owners of the business will not be worried about the way the business will engage in the business and not realizing the strategic importance of the larger spending and or the activities which may result in significant impact on the business.
Every management and or the business owners are urged to place importance on the level and size of the spending based on its own merits. Accordingly, they can ensure that every spending will bring the needed returns and confirming a right ROI for their businesses. The size of spending is significant or not is based on the size of the organization and the nature of the spending as well.
Following are few recommendations relating to needed spending of the businesses are as follows:
- Introduce delegation of authority and evaluate every payment accordingly
- Form a management committee who will monitor all payments
- Define the nature of the spending and rank the necessity
- Arrive a materiality threshold with regard to payments and involve approvals accordingly
- Form a team of approvers for any major payments are in need
- Generate a regular report for the payments done on a regular basis and submit for approvals with senior management
- Conduct internal check on every payment involved in the business
It’s important for the senior management to have a better control on every payment involved in the business.
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