Budgeting Tips

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If you run a business, it’s possible that you are operating on a relatively limited budget. Whether sales are slow in your business or you are trying to pay back loans you took out to cover your start-up costs, it’s in your best interest to conserve money wherever you can. To keep your business operating in the black, you’ll need to account for both fixed and unplanned costs, and then create a solid budget.

1. Define and understand your risks

Every business venture has a certain degree of risk involved, and all of those risks have the potential for a financial impact on your company. Paul Cho, managing director of Headway Capital, said that small business owners need to consider their long- and short-term risks to accurately plan for their financial future.

“How will changes in minimum wage or super requirements impact your workforce?” Cho said. “Do you operate in a geography at high risk of a natural disaster? Do you rely heavily on seasonal workers? Understanding the potential risks facing you on a short- and long-term basis is important for all small businesses. Once you’ve mapped out the threats to productivity, a clearer picture can be built around emergency planning, insurance needs, etc.”

2. Overestimate your expenses

If your business operates on a project-to-project basis, you know that every client is different and no two projects will turn out exactly the same. This means that often, you can’t predict when something is going to go over budget.

“Every project seems to have a one-time cost that was never anticipated,” said James Ontra, CEO of presentation management company Shufflrr. “It usually is that one unique extra item [that is] necessary to the job, but [was] not anticipated when bidding the job.”

It is always ­­advisable to overestimate expenses to allow for unexpected events and have the funds available if necessary to cover this.

 3. Pay attention to your sales cycle

Many businesses go through busy and slow periods over the course of the year. If your company has an “off-season,” you’ll need to account for your expenses during that time. Cho also suggested using your slower periods to think of ways to plan ahead for your next sales boom.

“There is much to be learned from your sales cycles,” he said. “Use your downtime to ramp up your marketing efforts while preventing profit generation from screeching to a halt. In order to keep your company thriving and the revenue coming in, you will have to identify how to market to your customers in new and creative ways.”

4. Plan for large purchases carefully and early

Some large business expenses occur when you least expect them — a piece of equipment breaks and needs to be replaced or your delivery van needs a costly repair, for instance. However, planned expenses like store renovations or a new software systems should be carefully timed and budgeted to avoid a huge financial burden on your business.

“Substantial business changes need to be timed carefully, balancing the risk with the reward and done with a full understanding of the financial landscape you’re operating within.” Cho said, “An up-to-date budget and data-driven financial projections are important components that help guide when to make large investments in your business.”

5. Revise your budget constantly

Cho suggests, “Regularly revisiting your budget will help you better control financial decisions because you will know exactly what you can afford to spend versus how much you are projecting to make,” Cho said. “Take into account market trends from the previous year to help you determine what this year may look like. Once you have a clear understanding of your business’s budgetary needs, you can accurately forecast what can be set aside for an emergency fund or unexpected costs.”

Budgets are an essential element of any accounting system.

If you would believe you are having difficulties with your current budget or would like assistance in formatting a budget for your business, please contact John Hurley on 02 9954 3843 or email admin@hurleyco.com.au so we can assist you.

The original article can be found at:

http://www.businessnewsdaily.com/8323-small-business-budget.html