When you are running a small business, every cent counts! From owners to other people involved in the small business enterprise, everyone pulls more than one function at a time, especially if the business is young. Whether your small business is just starting or has some years under its belt, finances are always integral to your success. Managing and running a tight budget can make or break your endeavour in a flash. To keep the ball rolling and stay on top of your game, you have to refine and use all your resources to their maximum efficiency. How? Here are some tips&tricks to get you started!
1. Plan for the worst, hope for the best
When you allocate funds in your budget for rainy days, you are not being a pessimist or a negative Nancy. As we all saw in the last couple of days, everything can go wrong and from bad to worse in a heartbeat. Every small business needs emergency funds that can bridge gaps in its operations. Let’s consider the alternative. Most small businesses that don’t have an emergency fund have to take out loans or liquidate their assets to weather the storm.
While it’s a solid short-term strategy, business loans can cripple any enterprise in the long run and buying new equipment is costly. When you have a diverse investment portfolio, you prepare for anything the world can throw at you. So, plan for the worst and hope for the best. The money you set aside won’t spoil and can only grow. Your future self will thank you.
2. Peak at what others do
There’s no shame in glancing over the fence and copying keynotes from your competitors. Start with a quick online search and learn about industry standards regarding budgeting, prices and expenditures. Each company is unique and has its requirements, but some costs are universal. Even a rough estimate provides a solid start for your budgeting needs. Talk to others in similar situations and businesses, branch out and network among your peers and do some benchmarking in budgeting. The more information you get, the higher your chances of setting realistic goals and optimising your budget!
3. Ask for help
By now, it is clear that budgeting and everything involving it are no small tasks. A herculean effort requires help and your business depends on you doing everything you can to make it work! The standard way and practice are to establish your accounting department. Such an option requires plenty of time, research, screening people and again, time. Double everything involved if you are making one from scratch. Plan B is to start taking courses and invest in your abilities to create and plan for a budget. This plan involves time and money, with the chance of other items falling thru your fingers as you get overwhelmed with responsibility.
Having too much on your plate indicates that you need to start sharing and delegating procedures. Or how we call it in the industry, outsourcing. Outsourcing your accounting and budgeting needs to an experienced and reliable tax accountant from Sydney requires only a starting investment. You are getting a finished product in the form of an established practice, experienced people and practical know-how. The sooner you find your perfect partner, the sooner your budget will appear before you!
4. Profits and goals
We’ve talked about the importance of proper foundations for your budget. When you plan for the future, you need to look at the past. Even one year is enough to get you started with budget planning. Take a look at your profit margins from last year’s operations. The profit left at the end of the year becomes your foundation for the next one. That’s your rough estimate of what you can expect in this and for years to come.
Or you can look at it as the minimum target you need to obtain. Setting realistic goals in business leads to better planning. While we all want to make millions, when you set such high goals, you are only setting yourself up for disappointment. The truth is that there are no shortcuts to financial victory. Steady yearly growth is your ideal goal. Year by year, you will see how budget planning gets automated as you learn and grow.
5. Plan for investments
Every business needs investments to grow! You can’t create something out of anything, as money exists to be spent and multiplied. Each business in Australia is subject to volatile trends over a year. Improvements and advancements seemingly happen overnight, and your budget needs to have an investment item so it can follow. Any business investment made is a potential chance of getting twice the returns. You don’t even need to always go for the latest and greatest. Good deals and windows of opportunity can happen at any time during the fiscal year. If you’ve planned for investments, you can stay ahead of the competition and grab those opportunities before anyone else!
6. Stress test costs
Your budget consists of fixed and variable costs. Fixed costs are usually steady, as the name implies, and consist of insurance, outsourced services, utilities of all kinds, and equipment leasing if you have any. These will happen throughout the year, and you can factor them into your budget and prices. Variable costs are where your budget can shine and where you have wiggle room.
Prices of parts, labour, machines and so on can be vastly different if you shop around. Re-evaluate your current suppliers and see if there are any profitable alternatives. Try to optimise your work process and see if there are some unintended costs. Making a budget is more than looking at a spreadsheet. Look at your entire cash flow, and the physical effects your operations have. Then you will be able to create a realistic projection!
Allocating a budget is a skill that improves and gets easier the more you do it. This is the case with anything in life and business. Taking a proactive stance and getting involved in the action turns you into a better leader! When you know where each cent is going, you work harder to make the most of it! And business results are sure to follow!
