If you’re running a small business, you will know how much difference a couple of hundred pounds can make in your budget. With the added pressure of employees to pay at the end of the month and suppliers to settle accounts with, it’s vital to have good business accounting practices. Whether you deal with the accounts for your business or you hire someone else to, it’s important to have good habits with money and know your financial health. Pounds Till Payday have some advice on how and why to budget for your business.
Budgeting isn’t just about the current or the past, it’s vital for the future too. Most business owners have plans for expansion, no matter how big or small, and your finances will no doubt play a part in those plans. No budget will be foolproof but knowing your cash flow will give you a good idea of how you can afford to expand. Knowing your business’s financial health will also allow you to set goals for your company to achieve. It will also help you to set salary expectations for your staff.
If your business relies on suppliers to help undertake client jobs, you can use your budget to assess how many of these jobs you can take on. It’s inevitable that some of your clients won’t pay you on time for the work you do for them, so your budget can bare this in mind. Having an idea of your monthly finances can also enable you to track the growth of your business year on year and make predictions for upcoming years.
Where to cut back
Creating a budget will also give you a chance to match your outgoings with your incomings. While you can’t predict your incomings, you can always keep on top of what is going out of your accounts. Check what you pay your suppliers and utility companies and do your research. Comparing and changing can sometimes save you hundreds a year and keeping overheads down, keeps your profit up. If you’ve been with your current suppliers for a while, try getting them down on price as you are a loyal customer. The same goes with the rent on your business premises. If rents are gradually creeping up then negotiate with your landlord. If they aren’t willing to budge then look for somewhere more affordable.
Once you’ve been working in your business for a few years, you should have a good idea on peaks and troughs of the industry. For example travel agents will see a boom in the winter months as families start booking trips for the warmer months and catering companies will see a boost during warmer weather when people are holding events or weddings. Budgeting will allow you to ride the wave of busy months but still keep your head above water when things are moving a little slower.
If there is a big discrepancy and your cash isn’t flowing in the right direction, it could be time to make some more serious cut backs. If your staff overheads are costing too much or are becoming unattainable it could be time to make some tough decisions. The same goes for staff perks and extras. If you have company cars or big trips away then make sure you’re getting the best deal on them. If they are still eating away at your profit then it’s time to trim the fat and get rid.