The size of a business doesn’t matter - a well-managed budget is vital to success. If you can learn to prioritise, budget by department and plan ahead, then you’re on the right track. Here’s how to manage a budget to ensure you consistently make a profit and manage other expenses.
Planning and creating your business’ budget should be the cornerstone of the budgeting process. This step is vital as it can ensure long-term success for your business so you can see past next week, next month, next year and so on. Here are some critical steps to take when creating your budget:
When you plan your budget each year, it’s easier if you’ve done forward planning. Look through your business’ calendar for the entire year to find out which months could be expensive and where you can save money.
Be sure to account for both small and large expenses, whether it’s office supplies or a significant renovation. They can add up to more than you might expect, plus it’s crucial to be accurate as you can and not over or underestimate. If you avoid rounding up or down, you won’t cut any corners and you won’t run out of money. It’s the best way to avoid any financial surprises.
You might only have a handful of departments in your business right now, but it’s just as essential to make sure each department receives the same level of focus. Again, look back at the previous year to see what the income and expenses were and use the figures to allocate each department’s budget for the coming year.
Analyse where you have leftover budget, which department needed more money than expected and did any require you to dip into other funds? This should give you a clearer idea as to how much budget each department requires. Any guesswork could leave some departments short. Taking the time budget by department will keep everything moving seamlessly.
It’s easy to assume that everything in your business is vital all-year-round. However, when you look over the past year or even further back, you may spot trends that certain months or seasons are slower than others. For example, you might notice that your business performs better financially in summer than it does in winter.
If you learn to prioritise during any slower months or seasons, then you can avoid spending the rest of your year making up for potential financial losses. Therefore it’s important to know the levels of priority for each investment or purchase.
If there’s something you want to purchase for your business, ask if it will improve processes, make your staff more efficient or even make you a profit. If the answer is yes, then it could be a higher priority than something which is a nice-to-have rather than a must-have.
While you’re busy making sure that your business is satisfying clients and customers, it’s also crucial that your employees enjoy working for your business. That doesn’t mean you need to hand out bonuses all the time. While actions like these can feel rewarding and motivate staff members, there are other inexpensive ways to help them feel valued.
This can mean setting aside a budget for parties, socialising, team-building activities or even birthday cards. You should always account for this when creating your budget each year, so you don’t get caught out. Plus, the staff will know how valuable the budget is and they’ll be more appreciative.
It can be a business and financial nightmare to realise that you need a large sum of money that your business hasn’t prepared for - especially if there are still many months remaining until the end of the year. This can be anything from needing emergency equipment to replacing an employee, so it’s always a good idea to have some emergency funds that your business can rely on.
If you prepare for the worst or unexpected costs, then it won’t impact your budget for the rest of the year. For example, if you operate on a month-by-month budget and there’s an issue in the first quarter of the year, you won’t need to dip into the budget you’ve set out for the other three quarters.
Instead, you’d have an emergency fund you have created for potential situations like these.
Creating a budget for your business and managing it doesn’t need to be a complicated or overwhelming process. Although the tips and advice above will help you, we’ve also created some helpful templates to help with budgeting so that you stay prepared for the entire financial year.
When managing a budget, quite often the most challenging aspect is tracking everything. If you want a simpler way to budget effectively, then we’ve got a bunch of templates that you’ll find useful.
Get your free template now using the link below.