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Budgeting for Small Business Owners – Five Top Tips

If you’re a small to medium enterprise (SME) owner then you’ll be aware that budgeting is one of the most important jobs you need to do to keep your cash flow steady.  Maintaining a steady cash flow, as we’ve pointed out in the past, is vital to run a successful business, especially in these days of economic uncertainty.  Today we’re going to take a look at five top budgeting tips for small businesses owners that can help you to get the best out of your budget for your company.

  1. Time is Money – when creating your budget plant it’s important to remember that your time is valuable and must be factored in.  You’ll need to be aware of the headcount in your office or work premises and the average time scale that should be allotted to each job.  If your company misses deadlines due to the fact that you’ve estimated time incorrectly, your business will lose money as a result.  Factor in some time to deal with customer feedback too – this is a great way of finding areas in which you could improve – you can analyse your work and make any changes that will lead to increased efficiency.  Make sure you pay your bills on time – late payments are on the increase and can be damaging to your business and the business of your suppliers.
  2. Be Sales Cycle Savvy – so many businesses suffer ups and downs when it comes to sales – there may be seasonal sales, slow periods and busy periods and you’ll need to be aware of all of these.  Try to adopt a strategy that will allow your business to weather the slower periods.  Planning your marketing campaigns and budgeting effectively will prepare you for the irregularities in your sales cycle and you’ll be able to organise your workforce and their tasks to increase productivity.  While it’s impossible to totally avoid slow periods, you can use the time productively to devise creative new methods of engaging customers and planning future marketing efforts.
  3. Avoid Absolute Accuracy – when planning your business budget, avoid budgeting down to the last penny as you can guarantee that you will be faced with unexpected costs at some point, however accurately you plan.  Unexpected costs can be due to damage and breakages of equipment or materials, customers paying late or a loss of business.  Make sure you keep some spare money for such occasions and try to prevent regular late payment from customers.
  4. Reduce Debts Rapidly – so many businesses run on credit but as long as bills are paid on time, this is not classed as debt.  If you’ve taken out loans to cover a crisis or start your business, then get rid of the debt as quickly as you can.  Debt can slowly chip away at your cash flow so working debt repayments into your budget will help you to pay it back quicker.
  5. Review, Review, Review – make sure that you constantly review your business budget so that you can revise it when you find something that’s not working.  Because your business is always evolving, so should your budget to take into account growth and profit patterns.  Revise your budget each month to keep up to date with where your business is heading.