What Are Routine Revenue & Expenditure Decisions?

by Devra Gartenstein

Routine revenue and expenditure decisions are the day-to-day decisions that business owners make regarding how to generate income and pay ongoing expenses. In a well-run business, these daily decisions will sync with long-term goals and choices such as company mission and business model. Expenditure and revenue decisions such as inventory purchasing and sales calls can often be delegated to employees. However, a savvy manager should closely monitor the overall direction of these transactions.

When and What to Buy

Small businesses make daily decisions about inventory and equipment purchases. These decisions should take into account customer demand and overall business model: If you're operating a produce stand, for example, it doesn't make sense to also sell sunglasses. Routine purchasing decisions should be made with an eye on inventory levels: Buy enough to cover typical sales rhythms but not so much that you'll have to store an unwieldy amount of excess inventory. Effective purchasing decisions depend on accurate records as well as anecdotal observation and intuition. Your records will tell you what customers have bought in the past, and observation and intuition provide additional information for predicting future sales patterns.

Cash Flow

Routine revenue and purchasing decisions depend on how much money you have available. Cash flow shortfalls force you to prioritize spending decisions. When money is tight, it makes sense to pay the most urgent bills first, those that accrue late fees and finance charges if you miss deadlines, as well as essential infrastructure expenditures such as rent. Shortage of capital also highlights the importance of expenditures that will generate additional capital in the short term, such as having enough inventory and staff available to meet immediate customer demand.

Building Markets

Sales revenue depends on customer demand, and, as a business owner, you make daily routine decisions about how to draw the clientele that will generate the revenue you need. If you operate a wholesale company, you may choose which accounts to cultivate through point-of-purchase advertising and product samples. If you own a retail business, you may choose to tailor your ads and your storefront to a specific demographic. The more successful your efforts to target and attract the right clientele, the more revenue you will generate.

Managing Credit

Small-business management inevitably involves borrowing and repaying money, and the process of managing credit is tied to ongoing revenue and expenditure decisions. Revenue from loans and credit cards helps your business to operate and expand, but business credit should be used judiciously. Don't borrow more than you can repay. Spend borrowed funds on essential purchases and carefully planned expansion projects. Pay close attention to interest rates and account balances, and choose credit options with reasonable interest rates.

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