Running a small business typically involves operating on a relatively limited budget. However, the task of developing this thorough budget plan can be overwhelming. It can be difficult to track and manage your finances, not to mention the unexpected expenses that always have a way of popping up. If you want your business to continue to operate in the black, you will need to stick to a solid budget.
Consider the following tips to help you create a budget that keeps your finances in order:
Define and understand your business’ risks
Every business venture will face some degree of risk, and every business owner must assess the potential financial impact that risk could have on their company; this includes both long- and short-term risks. Failing to do so could jeopardize the business’ financial future.
According to Paul Cho, managing director of Headway Capital, “Once you’ve mapped out the threats to productivity, a clearer picture can be built around emergency planning, insurance needs, etc.”
Overestimate business expenses
For individuals whose business’ operate on a project-to-project basis, they know all too well what it means to have unexpected expenses. No two projects every turn out the same, which makes it difficult to never go over budget – it is simply going to happen. Each project will have a one-time cost that was never anticipated.
James Ontra, CEO of presentation management company Shufflrr, advises that you should budget slightly above the anticipated line-item costs. He explains that this will ensure that, if you do find that you have gone over budget, you are never fully unprepared.
Breakdown your sales cycle
Take advantage of your business’ “down time” or “off-season”. While accounting for your expenses during this time, take a moment to also plan ahead for the next sales boom. You can learn a lot from your business’ sales cycles.
Cho encourages business owners to “Use your downtime to ramp up your marketing efforts while preventing profit generation from screeching to a halt. In order to keep your company thriving and the revenue coming in, you will have to identify how to marketto your customers in new and creative ways.”
Plan in advance for large purchases
Equipment and vehicles break down, and usually when you least expect them to. These costly repairs or replacements are typically impossible to predict or plan for. However, a store renovation or new software system is a planned expense. They can be carefully planned, timed and budgeted in order for your business to avoid a huge financial burden.
Constantly review and revise
As your business grows and changes, your budget must evolve along with it. It will need to be adjusted based on your business’ growth and profit patterns. By revisiting your budget – both your monthly and annual budgets – on a regular basis, you will always have a clear picture of your business’ finances.
“Regularly revisiting your budget will help you better control financial decisions because you will know exactly what you can afford to spend versus how much you are projecting to make,” Cho explains.
As you start going over your budget, make sure you have also considered the working capital your business needs to be flexible. If you are launching a new business venture, this is especially important. A merchant loan for startups with an alternative lender – like First American Merchant Funding – can offer the working capital you need to take advantage of every opportunity and weather any economic storm.