Budgeting is a crucial step in running your business. Some benefits of budget planning include showing you how much money can you spend on each division of the business, how much revenue you would need to recuperate all your costs and expenses, as well as directing you where to invest in.
However, budgeting doesn’t need to be very difficult. Any small business owner can learn to budget by studying budget planning or using software recommended by small business accountants.If you choose the former, this article will explain some practical tips for your budgeting process!
Understanding Your Industry
Not all businesses are alike. Some businesses such as ski resorts and souvenir stores are seasonal and cater to more tourists at certain times of the year, while some businesses like car repair centers are more stable.
With this in mind, you need to consider if you would need to hire part-time staff to help around your business during those peak seasons. What will their benefits be? What about overtime?
You should be able to decide on whether you would prepare your budget on a semi-annual, quarterly, or even monthly basis. Rather than starting a new budget template from scratch, you can always find budget templates for Google sheets online.
Plan for the Worst
Make sure that you include a cushion of cash as an emergency fund for your business. It’s tempting to spend extra cash on variable expenses and reinvesting it in your business, but there might come a day when you wish you hadn’t.
If your inventory gets wiped out because of a flood or your truck has a busted tire out of a sudden, you can always dip into the emergency fund rather than scraping for funds from another division or line item’s budget.
The size of this fund should also reflect the nature of your business. It is advised to have between three months’ to a year’s worth of your expenses set aside in your rainy day fund.
Your budget only acts as a guideline and does not reflect the day-to-day operations of business very well. So, yes, you are allowed to revisit your budget plan on a weekly basis to make sure your spending habits are aligned with it.
If you have gone overboard with the spending on certain segments, you’ll be aware of this if you revisit your budget frequently and can make the appropriate cuts the following month or borrow money from other line items. Point being, you still have the resources to be in control of your finances before it’s too late.
Sharing Your Budget Planning
As a small business owner, you might think that keeping your business budget to yourself is the best way to run things. However, this couldn’t be further away from the truth and you shouldn’t bear this burden all alone.
Your employees should be aware of your budget to a certain extent. When they realize the limits of your financial resources, they can find more creative ways in reaching their goals as well as reaching higher productivity levels.
This creates a healthy competition between the employees of your business and empowers your employees as there is more trust and transparency within the business.