4 Smart Ways to Allocate Funds for Your Business

Posted by on January 28, 2013 in Business Financing [ 0 Comments ]

allocating fundsBecause businesses must make constant adjustments to stay competitive, those in management positions must regularly adjust how to allocate funds. Most executives allocate funds using a process similar to the following:

  • Identify and analyze the important operations
  • Determine cash flow
  • Rank business operations according to priority
  • Total the cost of high-priority activities

Managers should be able to execute these steps well, and owners should know where to apply this process in their business. Sometimes in-house allocation results in greater profits, but outsourcing is still an excellent way to allocate funds.

Related: Business Finance: Creating Your 2013 Budget

Outsourcing promotes efficiency, allowing all to do what they do best. It enables greater flexibility to react in today’s rapidly changing markets. This kind of allocation can also add stability to your business. Here are four general ways to allocate funds through outsourcing.

1. Talk Manager to Manager

This is the most widely used method to allocate funds between businesses, and it is the umbrella under which the following allocation methods fall. It allows funds to be assigned across a number of different managers.

Manager-to-manager communication, as it relates to outsourcing, promotes optimum efficiency between businesses, and managers can easily share ideas about how they should use the funds. Good managers do not allocate funds equally across various areas of their company, but they divide funds according to priority, which improves focus on:

  • Core financial requirements
  • Employee performance
  • Contribution to strategic goals
  • Potential of projects to create value

For example, if a company decides to outsource their HR, the manager can talk to an HR company manager who is familiar with the company’s needs and knows exactly how to accommodate the company.

Related: Business Tax Deductions You Don’t Want to Miss This Year

2. Outsource Portfolios

If your company offers an investment portfolio as a benefit to employees, outsourcing the portfolios is an excellent way to reassure employees of their investments. Managers can communicate with investment companies whose expertise is investment portfolios. The managers of the investment companies can implement a number of strategies to help your employees achieve a maximum return on their investments. If your valuable employees feel secure with their investments, they will be more likely to remain with your company.

Related: Set up 401k’s for your employees with one of our hand-picked vendors.

3. Broaden Expertise

Don’t limit yourself. If you have prioritized your business operations and determined a balanced cash flow, consider allocating funds to also include outsourcing other departments. The more expertise you have across a number of departments, the more efficient and profitable your company will be. Experts outside the company can offer a different perspective and propose new strategies on various aspects of your business.

4. Outsource to True Specialists

The companies to which you outsource should have a sound business model for outsourcing. The outsource companies should appreciate the reasoning and risks involved with your investment in their services.

For example, in the case of payroll, employee budget can be complicated, especially if your company is growing or you already have numerous employees. If you outsource to an excellent payroll specialist, you can gain peace of mind with this area of your company.

In-house allocation isn’t always the smartest or least expensive way to use funds. Outsourcing can be an efficient and economical way to take care of internal matters. It can let you focus on projects that can increase productivity and strengthen your relationship with other businesses.

As you use these four types of allocation, your business will not only run more efficiently, you will also create a strong network upon which you can rely for various resources. You will be creating a business that won’t self collapse, but instead becomes part of a stable, reinforced network.

Photo credit: fitchickinthecity.com

Bio: Robert Cordray is a freelance writer and expert in business and finances. With over 20 years of business experience, Robert is now offers entrepreneur advice to small business owners.

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