It is imperative that companies know how much they’re spending on a monthly basis and maintain a budget for the sustainability of the business. Planning a budget is essential to ensure that the business remains profitable. Here are five tips that can help small and medium-sized businesses (SMBs) with their budget planning.
- Allocate available resources
Before planning a budget, it is important to know what are the resources available for expenditure. For instance, if there is leftover budget from the last financial year, you could use that to offset the current one. Ensure all financial statements from the previous year are reviewed before embarking on plans for a new budget.
- Understand your company’s expenses
To plan a business budget, an SMB must figure out its expenditure estimates before the financial year begins. Many small businesses operate with long-term budgets in mind and therefore miss out on the smaller details. It is important to set separate budgets for different needs, such as fixed costs, variable expenses and one-time spends. Moreover, as the business grows, it is essential to set aside budgets for marketing or sales, for instance. It is better to overestimate your expenses by a bit and have spare change, rather than running out and being unable to implement important policies or actions due to insufficient budgets.
- Create spreadsheets
Creating spreadsheets is an inevitable process in planning business budgets. These are an integral part of running any business efficiently. Every SMB needs to determine how much to spend on various areas of the business. Spreadsheets can help to successfully review expenditure at a glance and maintain orderly accounts.
- Regularly review the budget
When organisations go through growth or suffer loss, it is important to review the budget to evaluate where the company’s finances stand. When such changes occur, it might necessitate revamping the budget: allocating more money to one area and less to another than previously planned, or reducing budgets across all operations substantially (in the case of a loss in business). This can be done only when the entire budget is reviewed. In order to avoid obstructing the business when this actually happens, reviewing the budget periodically keeps business processes running smoothly.
- Build your emergency fund
As much as planning a budget is important for business decisions, it is equally important that an emergency fund is available when needed, so that the business can continue to stay afloat. Unfortunate events can occur at any time. Be sure to allocate an amount to contingency funds to allow your business to tide over such unforeseen circumstances.
Successful businesses invest a good amount of time in organising and monitoring their business budgets that their business can keep humming along. You can also achieve this by implementing some of the suggestions discussed above.