It does not come as a surprise that starting a business invariably requires some level of funding. However, expenses do not end once the venture is established. As a business owner, it is essential to devise and maintain a robust budget to regulate your finances.
You see, your business goes through upswings and downswings, which is perfectly fine with due preparation but can lead to some unpleasant situations if your finances are not in order. Have a budget to tide you through hard times and keep a steady cash flow going. Here, we round up our favourite budgeting tips for small businesses to have a profitable, hassle-free year ahead:
1. Track your time
As a starting point, always overestimate your project timelines by a few days. That way, you do not have to look bad in front of the client, even if there is a delay. It is a smart practice to track how much time your projects and activities take so that you can set reasonable deadlines and cost them accordingly.
2. Define your risks
There are risks in every avenue of business, and it is essential to be cognizant of and to plan for yours. How much will your business be affected by changes in labour laws or the interest rate? Are you heavily dependent on freelancers/seasonal workers? This will help you properly plan for your risks, including emergency plans and insurance needs and mean you are less likely to be caught havng to rectify things that cut into your cash. Be a scout and ‘be prepared’.
3. Assess your expenses
Examine your books of accounts and identify patterns in your spending. What do you spend most/least on? Which of those are most vital, and which could have been avoided? Which expenses yielded the most returns?
Based on the answers to these questions, plan out your expenses for the year with a focus on things that brought you good returns on investment, as well as cheaper alternatives to items that cost more than necessary.
4. Get your team involved
Do not take on the burden of budgeting all alone! Involve your team and get their insights on how finances currently stand and how money can be better managed.
Different employees handle different parts of the business, so their collective inputs will give you a fuller picture than if you were to examine things unilaterally. It is also vital to communicate budgetary/financial changes to the team, so they know what to expect.
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5. Examine your sales cycle
Pay attention to the cycle your business goes through during the year, especially peak and slack times. Knowing how and when these happen will help you plan your budget and marketing activities to keep your customers engaged all year round (and not just during the peak seasons).
6. Create a revenue strategy
It is not just your expenses that need examination. Take a close look at your revenue patterns, such as which months brought in the most revenue and which clients/activities were the most profitable. Then, craft a revenue strategy that makes the most of your profitable activities.
7. Pay yourself an actual salary
It is a common trope that business owners never pay themselves, but it is a trope that needs to be broken. You are working for the business just like everyone else, so you deserve to be paid. There are much better ways to cut costs – ask Bradleys Accountants for ideas.
8. Regularly visit your budget
Having scrutinised your expenses and income, work on projecting your budget for the following year. If you have strategic investments in mind for the new year, incorporate them into your budget.
Additionally, consider planning for financial contingencies, as it is preferable to be prepared when possible. Allocate funds for another emergency, even if you do not know what form it will take. You can set aside resources “just in case.”
You need to make adjustments based on your profit patterns and business growth. This is especially vital during the early stages when the budget may change several times due to fluctuating costs. Seasonal trends also influence budget and organisational efficiency.
9. Experiment with different budgets
Budget forecasting is not a one-time affair. You can devise multiple versions of your budget to find the one that suits you and your business best. For instance, you can project a budget based on massive investments leading to significant growth for your business.
On the other hand, you can project a budget based on unsuccessful investments that do not result in the growth you anticipated. While you hope that would not be the case, as a business owner, it is helpful to comprehend the financial implications of taking financial risks that fail.
You can take the time now to devise backup plans so you do not face complete failure. Enjoy this process, experiment with different budgets, and find the one that is ideal for you.
10. Hire a good accountant
Speaking of accountants, if your small business does not already have one, invest in one as soon as possible. An accountant like us makes it exponentially easier to plan your budget and stay on top of both expected and unexpected outcomes.
And if you are worried about the expense of hiring an accountant, we promise – the benefits you get will more than compensate for it. Fill out this form to start a conversation with us.
Hopefully, you now have a good understanding of which budgeting tips for small businesses to follow when chalking up the 2023 budget. And remember that what worked once may not work all the time – keep revisiting your budget every quarter, or even every month, and make adjustments depending on what you have learned or any market changes.
It will take a little time and effort at first, but before you know it, budget planning will become a breeze, especially if you have a skilled accountant on your side. Good luck!