A major purchase can be a key part of your growth strategy, but it can also create lingering cash flow stress for your operations. Before you spend thousands on equipment, software, or long-term contracts, it’s worth stepping back and making sure you’re asking the right questions.
Whether you’re buying to solve a problem or capitalize on growth, the right tools—such as small business accounting software—can give you the financial clarity to make smart, well-timed decisions. Here’s a few starting points to help you assess whether a major expense is truly the right move for your business.
1. Will This Purchase Generate Revenue, Reduce Costs, or Improve Efficiency?
Start with the “why.” What is the actual business case behind the purchase? Generally, every major investment should connect directly to at least one of the following:
- Increasing revenue
- Reducing expenses
- Saving time or increasing output
Try to draw a clear line between the purchase and one of these outcomes. For example, a new software subscription might improve productivity and allow your team to serve more clients, justifying the cost. But if the benefit is more vague or theoretical, you may want to wait.
2. Do I Know the Total Cost (Not Just the Price Tag)?
Big-ticket items often come with hidden costs. When evaluating a purchase, go beyond the sticker price and factor in the full cost of ownership, such as:
- Installation or implementation fees
- Maintenance and repairs
- Training or onboarding costs
- Long-term licensing or software subscription fees
- Insurance or regulatory compliance
Use your accounting records or consult your bookkeeper to estimate how this purchase will impact your budget not just now, but over the next 12–24 months.
3. What’s the ROI, and When Will I See It?
Understanding the return on investment (ROI) is critical before making a large purchase. ROI doesn’t have to be calculated down to the penny, but you should have a realistic projection.
Ask:
- How will this investment contribute to growth or savings?
- Over what timeframe will it pay for itself?
- What assumptions am I making, and are they backed by data?
For example, if you’re investing in a new delivery vehicle, calculate how many more deliveries you’d need to make per month to cover the cost. If you’re hiring a consultant, determine what success looks like and how you’ll measure it.
4. Is Now the Right Time?
Just because a purchase is justified doesn’t mean it’s urgent. Timing is key—especially when cash flow is tight or uncertain. Before pulling the trigger, consider:
- Do I have steady revenue or upcoming contracts to support this?
- Are there better terms available during a different season or quarter?
- Would waiting give me more leverage or insight?
Sometimes, a 60-day delay gives you time to build up a cash cushion or complete a forecast. Don’t rush into big spends without considering how they align with your broader financial cycle.
5. What’s the Impact on Cash Flow?
Cash flow is often more important than profit when it comes to day-to-day operations. Even if the purchase pays for itself in the long-term, you need to understand how it will affect your ability to meet short-term obligations.
Run the numbers:
- Will this purchase significantly reduce your cash reserves?
- Do you have enough buffer to cover payroll, rent, taxes, and other core expenses afterward?
- Could financing or leasing help spread the impact?
Many businesses opt to use tools like small business accounting software to run projections on different cash flow scenarios. This helps you plan not just for the purchase itself, but for the 30–90 days that follow.
6. Have I Compared Alternatives?
Comparison shopping doesn’t just apply to physical products—it applies to services, software, equipment leases, and more. If you’re considering upgrading your financial systems, for example, it may be worth looking into the various accounting solutions and QuickBooks alternatives to find the best fit for your growing business needs.
Create a shortlist of options and evaluate:
- Features or specifications
- Upfront vs. ongoing costs
- Terms and support
- Flexibility to scale with your business
Choosing the right solution now can reduce the chances that you need costly replacements or upgrades later.
7. What’s the Risk if This Purchase Doesn’t Pay Off?
Every investment carries risk. The question is how much—and whether your business can absorb it. Consider:
- What happens if the expected benefits don’t materialize?
- How easy is it to return, resell, or cancel?
- Would a smaller or phased investment allow you to test results?
For example, instead of committing to a full software rollout, could you start with a pilot for one department? Instead of buying equipment outright, could you lease for 12 months and reassess?
8. Do I Need Financing—And Can I Afford It?
If the purchase requires financing, understand the full terms before signing. Even low-interest loans or payment plans can strain cash flow if not planned carefully.
Before borrowing, ask:
- How will the monthly payments fit into my existing budget?
- Are there ways that I could get a better loan interest rate or other terms?
- Am I financing something with a long enough useful life to justify the debt?
It’s generally advisable to avoid using short-term financing (like credit cards or merchant cash advances) for long-term assets. The mismatch in timelines can create cash flow problems even when the purchase is worthwhile.
9. Will This Purchase Still Make Sense If My Business Changes?
Your needs today may not be the same six months from now. Before committing to a big purchase, ask whether it will still be relevant if your business grows or even pivots.
Some examples:
- Will this equipment still support your workload at double your current volume?
- Is the software flexible enough to handle new services or products?
- If you had to downsize, would this be a burden or a benefit?
Try to choose options that give you room to adapt. Flexibility can be just as valuable as performance.
Big purchases will rarely be without an element of risk, but asking the right questions can help you evaluate the risks sensibly and make the smart choices. Before you hit “buy,” step back, assess, and move forward with confidence.
