When running a small business, you’ve got a limited cash pot to play with. So, it’s super important to handle your cash wisely, setting clear budgets and spending limits for all parts of your business.
Let’s chat about why budgeting is key for your financial game plan and how to keep your company on budget with a healthy cashflow.
4 tips to keep your business budget in check
Running a successful business requires keeping a close eye on your spending.
While sales might be strong, overspending on operations, marketing, payroll, or new tech can eat away at your profits.
We’ve outlined four ways to make solid budgeting a core part of your financial routine.
1. Embrace the power of budgeting
A solid business budget sets you up to run a financially sound and successful business that’s in charge of its spending. No need for fancy budgeting apps – a simple breakdown of income and expenses in an Excel sheet works great to kick things off.
Here’s how to start:
- Track your expected sales to know your future revenue and make a solid income projection for the year.
- Calculate your costs, from fixed ones like rent to variable ones like inventory and marketing. This gives you a clear picture of your total spend. Remember to include taxes and an emergency fund.
- Set clear budgets for the upcoming spending period based on your predicted income and estimated costs. Keep some buffer for price changes and inflation.
- Regularly update your budget to keep it current. This helps you track progress, spot areas to save, and make informed decisions on where to allocate resources. Remember, a budget grows with your business – adjust as needed.
2. Track your budgets, income and spending
Setting the budget isn’t the final step. It’s crucial to keep tabs on all your income and expenses and adjust your budget based on how your business finances are doing. Using the latest cloud accounting software can be a game-changer. These cloud tools help you record your transactions in real time, so you’re always working with the most current numbers when you review and revise your budget.
For better tracking:
- Use codes to categorise your expenses – the Chart of Accounts in your accounting software makes it a breeze to categorise each expense as it happens. This makes it super easy to check your financial reports and analyse your spending habits.
- Check your spending – review your spending against each code to see where you’re on track and where you might be overspending. Any subscriptions to axe or vendors to negotiate with?
- Plan for seasonal trends – keeping an eye on your income and expenses helps you anticipate financial ups and downs throughout the year. The more you grasp your cashflow, the better you can stick to your budget, make smart financial moves, and dodge unexpected shortfalls.
3. Separate your personal and business finances
It’s easy to see the business money as ‘your money’, but it’s crucial to keep a clear line between the company’s funds and your personal cash, as the owner and director.
Here’s why this distinction matters:
- Get a dedicated business bank account – all your earnings, supplier payments, and transactions go through this account, keeping your personal and business finances separate.
- Keep tabs on your business spending – with separate business and personal accounts, you can easily manage your business expenses and budgets without mixing personal costs into the equation.
- Think about a business debit card – having one lets you pay for business expenses directly from your business account, making it simpler to track spending and stay on top of your budget.
4. Forecast for the future: don’t just track the past
Basing your budget and financial strategy on past data is a solid start. You can also use this data to look ahead and make useful forecasts. For instance:
- Get clear cashflow predictions – by analysing your past sales trends and expected expenses, you can quickly predict your future cashflow. It’s super handy for planning your budget.
- Plan your budgets and cash flow – with forecasts in hand, you can prepare for seasonal changes, spot potential funding needs, and make smart decisions about your business strategy.
- Stay ahead of the game – with strong budgets, forecasts, and a good grip on your finances, you can take control as a business owner. No matter what challenges come your way, you’ll be prepared, flexible, and ready to adapt.
Talk to us about getting on top of your budgeting
Managing finances can feel like a lot, especially when you’re new to running a business. But hey, don’t hesitate to reach out to a skilled accounting pro for some help.
As your adviser, we’re here to:
- Help you keep records, manage your books, and handle financial reports efficiently.
- Offer advice on budgeting, forecasts, and financial management.
- Keep your cash flow and budgets in good shape.
Get in touch now to talk about budgeting
