Budgeting Tips for Small Businesses

When it comes to running a business, budgeting is a vital tool. Not only does it allow you to safeguard your financial health, it also allows for growth. When you consider that smaller businesses are often victim to more volatile forces within the market, budgeting is even more important. Surprisingly, a 2018 survey found that 61% of small business did not make a budget that year. This means the majority of smaller businesses are missing out on all of the benefits that budgeting can offer.

Industry

A great place to start with budgeting is by researching the industry that you’re in and how similar businesses approach their finances. There is a plethora of information online on the wider industry, trends and information on cashflow. Some sectors are more volatile than others and it’s important to understand the environment that you’re working in, before you can make informed decisions on your budget.

Spreadsheet

The best way to approach your budget is by creating a spreadsheet which details all of your earnings and costs. You need to get at least a general understanding of company finance, including profits, revenue, profit margins and both fixed and variable expenses.

There are going to be unknowns within your budget, for example changes to utility bills or potential one-off costs in the future, for example marketing. Try to give yourself some wiggle room within your spreadsheet, allowing for higher-than-expected costs and protecting yourself from surprise expenses. Remember, spreadsheets can be changed and adapted as your business changes but having a solid base is the ideal start.

Goals

Once you have a working budget, the next step is to set manageable goals, allowing you to save money and boost growth. Goals are also a way in which to track the health of your businesses and gauge the overall trajectory of your success. For example, setting a goal for an increase in profit over a specific time frame will allow you to ascertain how well the business is doing.

Review

Budgets are only useful as long as they’re relevant, meaning they should be reviewed and updated regularly. Set aside time, whether that be weekly or monthly, to go over your finances and update your spreadsheet. The information can then be used to check the overall health of the business, what’s working, what isn’t and what changes need to be made. Regular financial check-ups can also help you to predict future trends and prepare accordingly. For example, if profits are flatlining and expenses are rising, you need to make changes before this has a permanent affect on the business.

Save

Every business will need to cut costs at some point, whether to stay afloat or to stimulate growth. Your budget contains all of your financials in one place and is therefore an invaluable tool for assessing how and where you can save money. Is there a particular outgoing that is increasing month on month? What about utilities? Are you paying more than you should be for rent? There is nearly always a way in which to streamline your business and make your money work harder.

In terms of actually cutting costs, there are a number of ways in which that can be done. For example, you should research and shop around before settling on a vendor and aim to get the best value for money. Maybe there is a product that isn’t selling well that could be discontinued. There is always a way in which to reduce your expenses.

Budgeting may seem like an arduous task but it can be surprisingly straightforward. Considering the benefits of a budget can be substantial, every business should aim to create one. Particularly smaller companies, which don’t have the same safety net as their larger counterparts.

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