Small Business Budgeting For The New Year
You have seen in recent times how uncertain the future can be, and how seasonal fluctuations can affect your business. Fortunately, after a couple of years at the helm of your business, those fluctuations can be anticipated to a certain degree; making it possible for you to plan and budget accordingly.
Here are five things you can do to make budgeting business expenses easier.
Don’t put it off – create a plan: Look at the next 12 months with the business peaks and valleys in mind. Create a strategy and a plan for how you will prepare for the slack times when revenues are good. Your strategy will help you stay focused in the heat of the battle.
Stick to the plan: If budgeting for future expenses is an important first step and creating a plan is the second, you will need to stick to the plan for it to be successful. That’s not to say you should adhere rigidly to a plan if situations change, but make sure you consider the plan and the ramifications of deviating from it in those situations.
Establish benchmarks and goals: Poor cashflow management is one of the biggest causes of small business failure, so establishing practices and strategies for properly managing your cash flow should be a priority. Make sure you’re on top of your cash flow metric and consult an accountant if you’re not sure of the best approach to take.
Stay on top of your customers: If you bill your customers by invoice and offer them 30 days to pay their bill, it doesn’t take very long for a slow-paying customer to eat up all the profit you may have had – making your busy season less profitable and putting your business at risk in slower times. To speed things up, you might offer your customers an additional discount to pay today or have a credit/debit card on file you can charge against at the end of the month. The goal is to avoid the inevitable cash flow challenges associated with slow-paying customers. The quicker you have access to that cash flow, the easier it is to manage.
Start saving: Setting aside a little cash for a rainy day doesn’t just apply to your household budget. There are a lot of unexpected business expenses that could be addressed with some money in the bank. A good goal to shoot for is 3 to 6 months of operating capital, but anything is better than nothing. Some of the smartest business owners regularly set aside some of their profits to ensure they have at least 3-to-6 months cushion should an unexpected event occur.
As we get ready to start the next year, there isn’t a better time to take a look at how you did this year and project a budget forward based on this year’s results.