Business Budgeting
Budgeting is the backbone of any business, providing a roadmap for managing resources, anticipating challenges and setting realistic goals. For small and medium sized enterprises (SMEs) especially, a robust budget can mean the difference between thriving and simply getting by. Let’s look at how to build a business budget that supports your financial health, plans for contingencies and prepares you for the future.
- Start with clear financial goals – having clear financial goals is fundamental to creating a business budget. When setting out goals keep them specific, measurable and relevant to your business needs.
- Understand you fixed and variable costs – a solid budget begins with a breakdown of your fixed and variable costs. Planning for variations helps prevent cashflow issues and ensures you can cover expenses especially through high demand periods.
- Build a cashflow forecast – a cashflow forecast will track your incoming and outgoing cash and help you to ensure you always have funds available to meet your obligations.
- Use budget friendly tools and software – Manual budgeting is time-consuming and prone to errors. Thankfully, there are numerous accounting software options available that automate budgeting, track expenses and generate reports to give you real-time insight into your financial position.
- Set up an emergency fund - Aim to set aside three to six months’ worth of essential expenses in a separate account that’s accessible but not easily withdrawn.
- Regularly review and adjust your budget - A budget is a dynamic tool that should evolve with your business. Set a regular schedule to review your budget against actual figures.
- Don’t overlook Taxes and Regulatory changes - Over the last few years, several adjustments in allowances and reliefs may impact your business, so make sure your budget reflects these updates.
- Prioritise profitability over growth - While growth is often a top priority, sustainable profitability is more important for long-term stability.
- Prepare for seasonality and market fluctuations - In industries where demand is seasonal, building a budget that accounts for these fluctuations is essential. Planning for seasonal cycles helps to ensure you have enough cash on hand during slower periods.
- Use key performance indicators (KPIS) to measure success - Setting up KPIs for your budget can provide valuable insights into how well your financial plan supports business objectives.
- Seek Professional Advice - budgeting can be complex, and it’s easy to overlook important details, especially with regulatory changes. Seeking advice from an accountant or financial adviser can ensure your budget is accurate, compliant and aligned with your goals. An adviser can also help you interpret financial data and recommend strategies for maximising profitability.
As Accountants we offer tailored services for a wide range of SMEs, we can offer specialised expertise to your business finances and strategies that will help manage your cash inflows and outflows.