Small Business Resources
Get your finances in order with these 4 budgeting tips
3 min read
If you own and operate your own small business, you should be virtually living for a budget. For good reason too, there are many potential rewards for savvy financial management and accurate forecasting. Poor budgeting, however, can lead to planning errors when you are mapping your business’ expected incomings and outgoings. This could be catastrophic.
In short, fail to budget and your business could follow suit. However, budget well and you will insulate yourself from unexpected cashflow issues and thrive through lean times. We assume you have the basics of budgeting and budgeting tools laid down already, so soak up a few tips on how to improve your budgeting.
1) Overestimate your costs
You really can’t go wrong with this overarching rule. In fact you can go very wrong without it… The rule? Overestimate everything, except revenue.
While an exacting and precise budget is always the ultimate aim, you will also need to make assessments and estimations which will cause a degree of uncertainty.
When making such estimations always err on the side of caution as a general rule. It is easy to count chickens that don’t exist, overestimate sales and underestimate incidental, ‘hidden’ costs. While an inexact budget can spell problems, an underestimated revenue stream will never go astray. Having more money than expected is never an issue and a great way to insulate yourself from cashflow problems. After all, it’s prudent to hope for the best while expecting the worst. Budget accordingly.
2) Pay attention to sales patterns
Once you have had a season of sales you should have the beginnings of a very important data set – your sales patterns. This revenue should already be logged in your books or automatically reported on within your accounting software solution. So really there is no reason you should not be analysing this existing sales data and using it to predict your cashflow.
Know when your busy periods are, know when your quiet periods are.
3) Use an app
If you enjoy tedious hours of entering receipts, exporting excel files, creating reports and trawling bank records to track your spending, please ignore this. If you don’t, you really need to get a dedicated budgeting app. There are countless premium options out there for the savvy budgeter and all will eliminate vast swathes of time and energy you may be wasting by tracking your expenses the analogue way without an easily obtained expense tracker. Furthermore, an inexpensive full-blooded accounting app like Reckon One tracks most metrics such as sales and remains the most competitive choice.
4) Get your team involved
Budgeting should not be purely the domain of the business owner. Get your staff in on the act too. Lay out responsibility for various aspects of the budget while maintaining oversight can be a positive move on two fronts. One, it will empower and engage your employees to be involved in the profitability of the business that employs them. Secondly, it spreads the load and releases some weight off your shoulders when it comes to handling numbers, stocks, sales and forecasts.
by Jane Chan, December 3, 2018