While running a small business might mean that you’re working with a small budget, this isn’t a good reason to do away with planning.
It might seem like a waste of time to be budgeting while you’re still growing your business, but it can help you to spot opportunities and navigate threats.
Budgeting is a habit like any other, and it might take some time to get used to it. However, once you’ve figured out the basics, you’ll have a system that can be replicated on a monthly or yearly basis. Here are our tips for creating your small business budget in 2018.
Look at Past Trends
The first step is to look at your income and expenditure for the past year. This will allow you to look for trends in your spending and look for opportunities to save money in the future. If you tried to make a budget in 2017, look at how closely you managed to stick to it.
Look for items that you made savings on, and things that you underestimated the cost of. This should help you shape your budget for the year ahead. For example, if business rent cost more than you expected because of hidden costs, you’ll need to add a contingency buffer for the year ahead.
Don’t Forget to Factor in Time
Your time is worth money, too. Factor this into your budget when you are looking at ways to save money. Before you decide to bring key services in-house, calculate how much it would cost if you paid yourself an hourly rate to do the task. Small businesses often assume that it’s cheaper to do things themselves because they assume that their own time is free. Factor in your own time before deciding if you’re really making any savings.
In an ideal world, nothing would come in over budget and every bill would be exactly what you’re expecting. In reality, this is rarely the case. If you have variable expenses to plan for in the year ahead, it’s important that you overestimate these in your budget. It’s always best to be pleasantly surprised when you get the final invoice than being caught off-guard.
Put Your Budget Front and Centre
Creating a budget at the start of the year and then forgetting about it is a huge mistake. You should be revisiting your budget throughout the year to see if you’re sticking to it, and if there are any areas that need to be adjusted.
Put Aside an Emergency Fund
Small business owners often forget to put aside money for unexpected expenses, simply because there isn’t much spare money available in the budget. Being strict with your budget will mean that you are able to put aside money for emergencies and growth. Cash flow is a serious issue for small businesses, so sticking to a budget can help you to put aside a bit of money every month, just as you would in your personal budget.