As a small business, your budget is likely to be limited, so it’s essential to formulate a budgeting plan and get extra funding in order to grow your business. Follow these 6 tips to help you set up a workable budget for your business:
1. Overestimate regular expenses
I always prefer to err on the side of caution when it comes to money matters and to overestimate expenses. This way you won’t be in for many surprises when those inevitable higher costs creep in. Inflate the costs for each line item so that if you do exceed the actual cost, you won’t go over budget.
2. Plan for sales cycle seasonality
Most businesses experience busy and quiet periods during the year. Plan ahead for the year according to your business seasonality. If you anticipate a slow period, make sure you have enough funds to keep you going through that time. You could also take out a short-term business loan to see you through the low season and to invest in your business growth. Slow periods offer a good opportunity to plan for the busy season and invest in business improvements, such as renovations and marketing efforts. It’s important to cut operating costs during slow times, for example, you could cut back on employees.
3. Anticipate extra expenses
Inevitably, every business will need to cover unplanned expenses, such as equipment repairs. Make sure that you plan for larger expenses like this by including extra costs in your budget. This will help you avoid financial strain when these costs actually do occur.
4. Save a percentage of every customer payment
Set yourself a policy of saving a certain percentage of every customer payment each month, and put this right away into your business bank account. Stipulate what these savings can be used for, such as for taxes, and how much should remain in your bank account as savings.
5. Review your budget frequently
Just as your business is constantly changing, your budget needs to change with it. Be prepared to have to adjust your monthly and annual budgets on a regular basis so that it actually reflects your business as it stands.
6. Get a business loan
Make sure you have enough working capital and funds available to grow your business. Take out a business loan so that you have extra cash available as you need it.
Budget correctly, manage your cash-flow and your business will likely be in a healthy financial position as it grows.