A business can have all the products or services that customers crave — but if it doesn’t have its finances in order, it’s doomed to sink before it leaves the harbor. That’s where the budget comes in. A budget is a map to help you navigate the dynamic and sometimes stormy seas of running a small business. Whether you’re selling handcrafts from a home office or running a consulting business with several employees, follow these budgeting tips to give your business a healthy boost.
Set Realistic Budgeting Goals
If you want a budget plan that pushes your business to grow, don’t neglect goal-setting on a monthly or yearly basis. Keep in mind that a budget is both a forecast of the future and an educational experience from the past. Revenue and expenses from previous periods can help you predict future cash flow, allowing you to set realistic profit goals. List your business’s fixed expenses and desired revenue, and use these figures to calculate how many sales you need to make to achieve your financial goals. Square recommends allowing for an increase in variable expenses, such as materials and employee hiring, as your small business grows.
Once you’ve formed budgeting goals for your chosen period, write them down in a personal planner for easy reference whenever you need a progress check. For small businesses with employees, budget goals should also be displayed in a visible location, such as on a white board or tack board.
Invest in Budgeting Tools to Keep You on Track
How do you keep your business numbers from becoming an infuriating mess? Get organized with a budgeting tool built for easy reference. Infusionsoft recommends investing in budgeting software or an office suite to track your expenses. However, before choosing your financial software, think of your business’ needs. Some of the more advanced options include inventory management, sales tax tracking and other useful extras. After installing the financial software, follow the prompts to input your numbers.
Completing this process on a yearly basis is essential for any small business, but the U.S. Small Business Administration recommends updating your budget on a monthly basis to flow with the changing tides of your business. After inputting budget numbers, write the data in a budget book or planner, or copy it to a mobile app for your tablet or smartphone. This allows you to easily track expenses on the go.
Leave Some Cushion for the Unexpected
What happens if you plan a tight budget for your business and you suddenly have to replace your laser jet printer? Square recommends starting up a rainy-day fund for these types of unexpected expenses or for a halt in revenue, such as a sudden, unpredictable drop in sales. Whether you choose to safeguard your money in a savings account or a locked cash drawer, having some extra funds on hand can get you through a rough patch.
If your business doesn’t have a nickel to spare, get out your calculator when making your cost and revenue predictions. Add to expected costs, and subtract from expected revenue when times are good so that your team works to produce just a little more than needed.
Never Abandon the Cost-Cutting Mindset
If you want to grow your business, you can’t start spending on luxuries the moment business picks up. One budgeting tip is to make trade-offs for big purchases that would fall outside your budget, cutting other variable expenses to keep your overall expenses within your chosen range. When making these big purchases, many recommend waiting until the start of a billing cycle to give yourself some breathing room.
During the rest of the month, constantly refer to the budget to see where you can cut back to maximize revenue. For instance, think about buying store-brand office supplies such as pens, notepads and staplers, rather than purchasing expensive name brands. For even more savings, buy your shipping materials and other office supplies in bulk.
Make running your budget even easier with the best practices for tracking inventory and business expenses. For instance, have a storage box or file holder to collect the month’s receipts, and keep inventory in a single location such as an office cabinet. If you still find yourself stressing over numbers, remember that a little practice can have you budgeting like a pro in no time.