A well-made budget is without a doubt one of the best tools you have at your disposal as a business owner. Indeed, it is a valuable skill, not something to be dreaded or avoided. We spoke to Peter East from innovative banking company Suits Me, who suggested a few things to consider for your next budget:
If you’re running a new business it is always better to have room for error. New projects aren’t always as easy in practice as they sound in theory and projects that have unknown challenges and costs can easily see you go over-budget which, for a new business, could cause a lot of trouble.
Even if something costs a lot more than expected allowing the very upper estimate avoids worst case scenarios.
Save to be on the Safe Side
The worst thing about tough times is that they are often or not unpredictable. Whilst it is tempting to splurge you should always have something saved as a contingency plan.
Once started, spending all of/more than what you earn is a difficult habit to shake. If you have rules in place, to deposit around 30% of your profit into your savings account, you’ll often have a contingency in place. But there is another side of the argument.
Frugal isn’t Always Best
Budgeting isn’t all about being thrifty and restrained. Budgeting is about finding ways to make improvements and what areas it might be worth investing in more. This is where the phrase “you have to spend money to make money” comes in. When done properly it can work out.
If one project comes in under budget, for example, reallocate funding to other projects you think would benefit from a boost. As an owner it can be tempting to pay yourself a bare-bones salary to reinvest everything you earn, but you are an employee too, consider if your being too strict with your expenses. When you want to splash out though, consider the timing.
Know your Sale Cycle
Speaking of timing, it is important to recognise that your business could have busy and quiet periods over the year. Spotting the trends can shape your spending for the entire year and optimise what you spend and when.
Use your business’ downtime to plan for the next year’s sales boom, using your resources to get the right infrastructure in place. Also, keep some money in the bank just in case. You might get less income than you hoped during your downtime.
Analyse your Budget as a Team
Take advantage of the combined talents of your colleagues. Having a diverse team scrutinise your budget will inevitably give you solutions you’ve missed. If you share the responsibility you can hugely reduce the pressure on yourself and give you time to get back to the things you enjoy about running a business.
If your entire business can see your budget you can receive valuable feedback as well as giving your colleagues an incentive to increase productivity and demonstrate your transparency as a business owner. Employees will be more mindful of the budget as they work and will actively help you meet your targets.
Check your Budget Regularly
Whilst it isn’t a bad idea to analyse your budget at set intervals, quarterly for example, it’s a mistake to think checking your budget can wait until then. Budgets are not static and require frequent scrutiny, especially for new businesses.
It is extremely useful for new business owners to check their budgets as often as possible (weekly at the very least). It to better understand their own sales cycles which dictates your entire spending for the year.
Regular checks make it less likely to miss the smaller details often overlooked in a quarterly report. They give you the opportunity to be more thorough and see where else you can save, whether that be switching broadband providers to finding software to automate something you spend a lot of time doing manually.
Online Banking and Software are Your Friends
Relying on Excel is bound to get complicated as your business grows, why not use accounting software to do all the work for you? A mouse click will allow you to make dozens of comprehensive reports in seconds, the time it takes to research and implement the right software will be made up instantly.
Also, online banking support has grown exponentially in the last decade. Tools you have access to through your bank might be unrecognisable compared to the last time you checked. It’s in your bank’s best interest to help you so use their support systems as often as you need.
Look out for free services: Many banks and software companies offer free solutions to businesses. Suits Me offer businesses free services to enable them to be an inclusive company and to not financially exclude potential employees by turning them away due to not having a bank account.