When you’re running a business, budgeting is one of the most important tasks you need to undertake. Deciding where to invest money and trying to forecast your ROI can be a daunting task, especially for start-ups or fairly young companies. Smart budgeting takes time and effort, it shouldn’t be something you throw together on the weekend, it should be well thought out and you need to stick to it. If you want to really get the best out of your budget for your company, there are many things to go through with a fine tooth comb; here are some tips on what you need to be thinking about.
Pay attention to your sales cycle
Many businesses go through ups and downs when it comes to sales, and there can be slow periods in between the busy ones and even seasonal sales. For example, if your business is selling garden furniture, you’ll be booming in the summer and slower in the winter. Consider having a strategy in place to attempt to avoid the slow periods from the start. Budgeting and planning your marketing efforts from the start not only prepares you for the ups and downs of your sales cycle but it will also organise your staff and their tasks; increasing productivity. You won’t completely avoid the slow periods as it happens to every business, but use this time to think of new, creative ways to engage your customers and prospects for future marketing efforts. If you’re a start-up you may not know what your sales are going to be like, try to forecast how you think they will go but pay close attention throughout the year and change your budgeting accordingly.
Time is money
When you’re creating your budget plan, never forget to incorporate your time into it. It is such a common mistake that businesses make and ultimately costs them money in the long run. You need to be aware of your headcount in the office and the average time scale for a job. If you’re missing deadlines due to not estimating your time correctly, you could lose money. Also, make time for customer feedback. There is no room to improve if you don’t know what you’re doing right and wrong, so always take the time to get feedback, analyse your work and make the relevant changes where needed. Incorporate this into your budget so you aren’t over working your staff and under delivering on your services. Also pay your bills on time, late payment is an ever increasing trend in business and it can be extremely damaging to your business if you don’t pay you bills on time. Read our blog post on why you need to keep up with your bills.
Reduce debt quickly
Many businesses run on credit, but as long as you pay your bills on time credit isn’t classed as debt. If you took out loans to start your business or in a time of crisis, getting rid of your debt as quickly as possible is in your best interest. Debt will slowly chip away at your cashflow, and the longer it’s left the higher the interest rate if you don’t pay it back. Working your debt repayments into your budget will help you manage your debt and pay it back quicker. Try to pay off as much as you can without breaking the bank, and avoid taking out any further loans or credit unless you are certain it won’t lead you back into debt.
Don’t budget down to the last penny
Your business budget is managing the amount of money you have to spend in the business, but don’t make sure every penny is accounted for. You can almost guarantee that some unexpected costs will come up even if you plan vigorously. Ensure you keep some spare money aside for if and when this happens. Unexpected costs such as a customer paying late, damage or breakages in your company or loss of business could mean you’re paying out money you haven’t budgeted for. Extra money will always come in handy, so try to keep some aside if you can and try to prevent things such as late payments. Read our blog post on how to get paid on time here.
Constantly review your budget
As much work as planning your business budget is, always try to revise it to see what’s working and what’s not. Things are always evolving so your budget will never be static. Always analyse if what you’re doing is still working and adapt your budget along with your business based on your growth and profit patterns. Revise each month of your budget accordingly and stick to it to get a clear updated picture of where your business is heading. Unexpected costs may have rocked your budget slightly, so you may need to adjust the rest of your budget accordingly.
Budgeting can be a hard job, especially in the constantly evolving market. As long as you are able to analyse your results and adapt accordingly, your cashflow should always be steady and your business should continue to grow.