It’s easy to make financial mistakes in business. Even when you try your best to stay away from risk and counteract bad past decisions, you can still fall into money traps here and there. And that’s why putting together a bona fide and flexible business budget is essential.
A lot of businesses tend to forego this decision, but it can make such a huge difference in the way you handle your finances. But that’s what this post is here to help with! The more you know now about the way your cash flow can fluctuate, and how you can work with that, the more successful your company will be.
Decide Fixed Costs and Any Variables
Every single business out there has fixed costs and variable costs – it’s just how the world works. What’s important is separating out the two categories. What is always going to cost you the same thing? And what costs are only going to occur every so often? Sit down now to think about these differences, and note down every potential cost you think of.
And more often than not these costs can overlap in certain areas. Hiring a new member of staff, for example, is a variable cost, but running company payroll is a fixed one. You still need to make sure you’re aware of which is which, as you need to have a budget allocation there for them each and every month.
Include Your Goals
What do you want your business to be able to do? Because when you know what you want to achieve with your company or your product line, you can better plan the budget to be adaptable. You can allocate funding and resources much more productively, and tick off milestones along the way.
So note down everything you need your company to do – you’re going to need cash behind you to achieve them! Include both short term goals and long term goals here; both things you could potentially achieve within a month as well as things you want to work up to over a period of years. Note these goals down as clearly as possible, as they need to be specific in order to outline the budget in the best clarity.
Look Out For Impending Pitfalls
Even when you’ve got a budget in place, it can still be possible to fall into a pit with your business account. However, it’s far less likely to happen, especially when you’re aware of the potential pitfalls in front of you. After all, you know the way you spend, and you’ve got goals to reach for regarding your customer base and the profit you want to bring in. Keep this knowledge in mind here; it’ll make all the difference to your budget sheet.
For example, if you’re planning to put together a fleet for your company, you’ll need to look into ways to improve gas mileage and reduce expenses. Filling up a host of cars or vans on a bi-monthly basis (at least!) can cause a $1000 or more dip on a regular basis. And that doesn’t even take into account the maintenance you’ll need to do, nor the training drivers will have to go through. All in all, you need to consider all elements of a task, and what the costs associated with it will be.
Come Back on a Monthly Basis
So, once you’re done with the initial plan, put it to the test. Use it for the month and see how your cash flow moves, and then come back once the month is over. What worked? What didn’t work so well? What seemed like a good idea at the time but clearly needs more development? This is your chance to answer all these questions and more.
Say your bills were higher than you expected this month, or you didn’t pull in as much custom as you were expecting – what will that mean for next month? Take your time refining your budget every 30 days or so and it’ll be much easier to reach the financial goals you once set out.
Designing a small business budget is going to be a challenge, but it doesn’t have to be the impossible feat you imagine. Indeed, many small business owners put it off because they think it’s far too complicated, and that can only get them into more trouble. So before you really get going with your company, make sure you’ve got this financial plan laid out in front of you.