Whether you’re just starting out, running an established business, or taking steps to scale up, budgeting should be something you do regularly. How regularly will depend on the stage your business is at.
We’ve done our fair share of budgets over the years, for businesses of varying sizes and at all stages. So we’re sharing why having a budget is essential for growing businesses, alongside our top 4 business budgeting tips!
Why create a budget?
A budget is a planning tool which plays a key part in your business finance. A well thought out budget should give you a clear way to forecast your earnings, plan your expenditure and prevent you from over or underspending.
They also help you determine whether your costs are essential or optional, which is important for all business owners, particularly those who’re just starting out and have a limited income.
Having a budget will help you keep an eye on cash flow, understand your profit margins, whilst helping you accurately price your products and services at the right level.
Now we’re not saying it’s impossible to run your business without a budget but trust us when we say it’ll be far less stressful if you use one. Which brings us to our 4 top tips!
Ask yourself what you’re trying to achieve
If you’re doing a budget for the next year, it’s a good idea to ask yourself what you’d like to achieve in that time period. Whether it’s to get a bigger premises, bringing in three new team members or to double your profit, your budget will help you understand when these changes could become an option. Your budget can also help you determine things like, much you can pay your new starters and with when you can pay them.
Plan for extra costs
It’s always a good idea to factor in unexpected expenses or additional cost for unplanned events and sudden changes. You can’t predict what will happen in the next year, but you can plan for several scenarios, including several team members becoming ill or demand for your product doubling.
Having an allocated emergency fund is also a good practice, if the last few years have taught us anything, it’s that things can change very suddenly!
Review and measure regularly
Once you’ve put a budget in place, it’s important to refer back to it and measure your progress, so you know how you’re doing.
Each time your business deals with a large expense or change, it’s a good idea to revisit your planned budget.
Over time you will need to adjust your budget as your business works towards and achieves its goals, or if you’re not in the position you thought you’d be. Having the budget in the first place means you can recognise these factors and take action or adjust where needed.
Don’t get budget fright
Budgeting may seem stressful in the short term, but it will reduce in the long-term. Remember a business budget is your best guess at what will happen in the future and no one can predict the future!
It’s far better to have a budget in place that you’ve tried to implement and follow, over going without and being unsure of your finances.
Your budget doesn’t need to always be 100% accurate, there will be times when it’ll be different to what you expected, but that doesn’t mean it’ll stay that way. It also doesn’t have to be set in stone, as we’ve said earlier, it’s a good idea to revisit it regularly, which means you can make changes as you need to.
Need help with budgeting?
We’ve been helping business owners with their budgets for years, just give us a shout and we can help you put one together, revisit or review an existing one!
