How to Give Directors the Data They Need Before Spending

Introduction - Data They Need Before Spending

In many fast‑growing construction and engineering SMEs, directors and owners approve expenditure on intuition rather than data. Perhaps they trust their team, are pressed for time or rely on outdated processes.

Yet uncontrolled spending erodes margins and creates cash‑flow pressures. This blog explores why directors bypass numbers, what information they need to see, and how often they should review it.

Approving spend without checking the numbers can lead to budget overruns, resource misallocation and compliance risks. For SMEs with tight margins, one poor decision can wipe out profits. Implementing spend control policies improves visibility and prevents fraud and overspending.

1 Why Directors Approve Spend Without Checking

Several factors contribute to this behaviour:

• Decentralised processes: Spending occurs across multiple departments or job sites, making tracking difficult. Without central oversight, directors may approve requests without a full view of the budget.

  
  

• Manual methods: Reliance on spreadsheets and paper receipts leads to delayed data and errors. Directors may not have accurate information at the time of approval.

  
  

• Policy gaps: If spending policies do not define approval procedures or categories, directors may rely on discretion.

  
  

• Poor visibility: Finance teams may depend on monthly statements to view spending. By the time data is available, overspending has occurred.

Need to review

Directors who are entrepreneurs or engineers by trade may not prioritise financial discipline. They may think checking the numbers slows down projects. However, the risk of unapproved or unnecessary spending is high. Recognising these patterns is the first step to improvement.

Strategy

• Acknowledge the problem: Hold a discussion at board level about the risks of intuitive spending. Use examples of cost overruns to illustrate the impact on cash flow.

• Document spending patterns: Ask finance to compile data on categories and amounts of unbudgeted spend. Use this to justify process changes.

2 What Information Directors Need

To make informed decisions quickly, directors need concise, accurate information. Many boards operate in the dark because reports arrive late or in complex formats. MUN CPAs recommend that boards review budget vs actual reports with variance explanations, comparative income statements, key ratios and balance sheet analyses at least quarterly

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Need to review

SME directors often avoid reports because they appear intimidating. Clear, visual dashboards and plain‑English explanations help directors understand the numbers without being accountants. Real‑time data reduces the need for guesswork.

Strategy

• Provide budget vs actual reports: At each board or executive meeting, supply an easy‑to‑read report showing spend against budget, with major variances explained.

• Highlight key ratios: Track metrics like liquidity (current ratio), gross margin and overhead percentage. Use colours and charts to indicate risk levels.

• Show cash‑flow forecasts: Include 13‑week cash‑flow projections to demonstrate the impact of spend decisions.

• Use dashboards: Set up dashboards accessible via tablet or phone that show real‑time spending by department, flagged when thresholds are exceeded.

3 How Often to Review and Control Spend

Infrequent review leads to overspending. Navan and Moss recommend regular reviews and audits as part of spend control. Finance teams should monitor transactions in real time and schedule formal reviews.

Need to review

Small businesses may think monthly reviews are sufficient, but weekly or bi‑weekly checks can prevent problems from escalating. Real‑time monitoring ensures compliance.

Strategy

• Set approval thresholds: Define spending limits by role. Purchases below a certain amount can be auto‑approved if within policy; higher amounts require finance and director sign‑off.

• Implement real‑time monitoring: Use expense management software to track expenditures as they happen, sending alerts when thresholds are breached.

  
  

• Schedule regular reviews: Hold weekly or bi‑weekly meetings to review spend patterns and adjust budgets. Review high‑risk transactions more frequently.

  
  

• Conduct audits: Quarterly or bi‑annual audits identify non‑compliant transactions and refine policies.

  
  

Key Takeaways

• Directors may approve spending without checking numbers due to decentralised processes, manual methods and poor visibility.

• Provide concise reports: budget vs actual, key ratios, cash‑flow forecasts and real‑time dashboards.

  
  

• Implement approval thresholds, real‑time monitoring and regular reviews to control spend.

  
  

• Frequent reviews and audits prevent overspending and improve cash‑flow management.

When directors have the right information, they can approve spending with confidence. For further insight into controlling costs, read our post on how to build strong internal controls and download our Spend Control Toolkit from the JFA resources page.

Wrapping up today’s insights, tomorrow we simplify another accounting challenge.