Most small businesses run on limited budgets and therefore need to make the most of the funds they have on hand. A well thought out budget will help a small business track and manage their expenses effectively. Here are some budgeting tips for small businesses.
- Define and understand your risks – It is important that a small business is aware of its risks as they can affect a small business’s financial position in the short-run. Start off by mapping your short-term and long-term risks and then identifying how you would rectify the situation.
- Overestimate your expenses – Small businesses that operate on a project by project basis, should overestimate their expenses so that they can make a reasonable profit if the costs increase.
- Sales cycle – Most businesses will go through busy and slow periods. Look at your slow periods as a way to plan for your busy periods as this will give you time to revamp different areas of your business.
- Plan for large purchases carefully and early – Large purchases can cut into your profits, therefore planning for a large purchase in advance will help you budget sensibly and avoid financial burden. Start by budgeting for depreciation early on, so that you can afford new equipment when you most need it.
Time is money – Make sure that your clients are aware that you work on a plan and therefore their feedback is important for you to proceed. Ensure that you hand your clients a clear plan that states the project’s timeline, from start to finish. A clear plan will avoid delays, maintain momentum and save you money.