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How to Budget for Financial Success ?


A solid budget is the foundation for your company’s financial management and success.


Here are 4 ways to stay in control of your business budgeting


When you’re operating and managing a small business, you have a small pot of cash to work with and that is it’s incredibly important to manage your cash well and to have clear budgets and spending limits for every area of your business operations.

 

Budgeting is such a vital part of your financial management and without it we know it’s impossible to run a successful business without having that level of control on your expenditure.

 

Sales is also very important but bear in mind even if you are bringing in high figures you might be overspending on your business running costs such as staff costs, advertising and marketing fees, investment in the upfront capital costs and other general expenses and overheads.

 

To help small business owners we have put together four ways for you to build your strong financial control around your finances with budgeting.

 

  1. Embrace the power of budgeting

 

A detailed well thought out budget can give you the controls you need on your spending.

 

Keep it simple you can use Excel to start your budgeting process, main thing is getting start with this process.

 

To get started:

 

  • Forecast your expected sales over the financial year.

 

  • Workout all your cost types i.e. Rent, Light and Heat, Marketing, Staff and Freelancer costs, Accountancy Costs, Office running Costs, and so on.  Use your historical spending as a guide.  Also build in some contingencies to cover emergencies and for tax liabilities i.e. vat, corporation tax, Income tax and NIC.

 

  • Flex your budget as things changes, you might have to add in some increase in costs from suppliers due to inflation and changing costs.

 

  • Build time in your diary to review your budget every month, keep updating it and keep it Alive and relevant.     It will allow you to make financial decisions when it comes to cost cuts, resource decisions making sure you have a right budget to support your business to grow.

 

2. Track your budgets, income and spending

 

Once you set your budget, next step is to compare to actuals, if you use a cloud-based accountancy software you can upload your budget into i.e. QBO, Xero, Sage and can easily track actual vs budget each period.  It will also get easier for you if you are using a system to track the up-to-date numbers and easier for you to rework your budget as well.

 

 

To improve your tracking:

 

  • Use codes to categorise your expenses – i.e. the chart of accounts in your accounting software, makes it easy for you to understand each type of spend by its own category by categorising each expense properly as it’s incurred. It will make your review process so much easier.

 

  • Review your spending by checking each budget lines actual spend and check if you are on budgets, review any under and overspends and understand why that is the case.  Do you need to unsubscribe to some subscriptions or renegotiate with your suppliers?

 

  • You can Plan for seasonal trends and patterns, tracking your income and expenditure and it will help you to spot, predict and plan for the financial ups and down you’ll experience over the year. The more you understand your cashflow, the better equipped you are to stay on budget, make solid strategic financial decisions and avoid unexpected shortfalls.

 

3. Separate your personal and business finances

 

It’s tempting to think of the money in the business as ‘your money’. But it’s crucial to have a clear divide between the company’s money and your own money, as an owner and director.

 

Here’s why that separation is important:

 

  • Open a dedicated business bank account – all the cash you generate, supplier bills you pay and transactions you carry out will be logged through this account. This keeps your own cash and your business cash entirely separate.

 

  • Track your business expenses – by having separate business and personal bank accounts, you can easily track your business expenses and manage your budgets. There’s no confusion around personal expenses that could potentially muddy the water.

 

  • Consider getting a business debit card – a business card helps you to pay for business-related costs directly from your business bank account. This helps you to track your expenses and keep a closer eye on your budget.

 

4. Forecast for the future: don't just track the past

 

Base your budget and financial strategy on historic data is a great foundation but you can also use this data to project the data forwards in time and create useful

 

For example, you can:

 

  • Get clear cashflow forecasts – based on your historical sales trends and projected expenses, you can quickly estimate your future cashflow. Having this view of your future cash position is extremely helpful when setting out your budget for the period.

 

  • Plan out your budgets and cash management – with forecasts at your fingertips, you can plan for seasonal fluctuations, identify potential funding needs and make informed decisions about the short, medium and long-term strategy of the business.

 

  • Be ahead of the curve – with solid budgets, forecasts and a great overview of your finances, you can be more in control as a business owner. Whatever the market throws at you, you’re better prepared, agile and ready to respond.

 

Talk to us about getting on top of your budgeting

 

Financial management can be overwhelming, especially if you’re new to running a business. But don't be afraid to seek help from a qualified accounting professional. 

 

As your adviser, we can:

 

  • Streamline your record-keeping, bookkeeping and financial reporting.

  • Give guidance on budgeting, forecasting and financial management.

  • Ensure your cashflow and budgets are always looking positive and healthy.

 

Let’s sit down and talk over coffee about getting your budgets and financial management in order.

 

Get in touch now to talk about budgeting

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