Small Businesses Should Live for a Budget

Budgets; a word no one is thrilled to hear but its presence is critical to the success of a business. It’s important you live for a budget.

Make budgets your ally

Financial plans and business plans must always run in parallel, communicate with one another and work towards the same goals.

Relationships like these take maintenance, which means continuously checking in with each other to ensure you are on the same page.

Chat to your bookkeeper or financial advisor about your options, they are the experts in this domain. They are they natives who work with budgets and financial plans all day, so use them wisely.

Set targets to track your revenue, expenses and cash flow to ensure your journey to success is moving forward. While it’s natural to lose focus and to not engage regularly or revisit budgets, it is utterly essential that we do return for continual assessment to track our finances. This is perhaps the most important point, review and revisit regularly.

The look of the budget

Budgets are made up of expected revenue or sales, less a listing of fixed costs, less a listing of variable costs; resulting in the expectation of net profit.

We list our potential earnings – business revenue: sales of good or services, corporate wages,perhaps dividends, interest and rental income. Then we focus on the ‘leakages’ commonly knownasexpenditure.

Expenses are outgoings – rent, lease repayments, interest paid on credit cards, stationery, product supplies, technology, accounting fees.

Hints on budget management

• More mature businesses should include actual figures in their budget, however if your business is in its infancy you will need to use expected figures or estimates.
• Buffer your plan with a 10 – 15% increase – this will cater for those sneaky unexpected spends that weren’t planned for.
• Reflect and review, pivot and change – often.
• Automate – use cloud accounting technologies to access easy dashboards for visual 24/7 net position and drill down for detail all from the front screen.
• Use budgets to collaborate with your go-to
• Track your budgeted figures against your actual – as a minimum review month by month or in line with the lodgement of your business BAS. Learn to change your behaviours based on this review.
• Know where your dollars are going and when they are hitting the bank account.
• The financial health of your business is of great interest to your investors, partnership, advisors and of course yourself. Invest in the ground work to ensure visibility to your key stakeholders.
• A true budget will be essential in your ability to secure funding from potential investors, interested parties and even financial institutions.

Budgets are one thing that will never stop popping up as crucial to your business’ success. Make it an ally and you’ve set yourself up for taking viable next steps into profit.