If you run a small business, it’s likely that you are operating on a relatively limited budget. Without a thorough budget plan, however, it can be difficult to track and manage your finances.
If you want to keep your business operating profitably, you will need to account for both fixed and unplanned costs. Then create and stick to a solid budget.
- Overestimate your expenses
If your business operates on a project-to-project basis, you know that every client is different and no two projects will turn out exactly the same. This means that often, you can’t predict when something is going to go over budget. For this reason, budget slightly above your anticipated line-item costs, no matter what, so that if you do go over, you won’t be shocked.
- Understand your risks
Every business venture has a certain degree of risk involved, and all of those risks have the potential for a financial impact on your company. Small business owners need to consider their long- and short-term risks to accurately plan for their financial future.
“How will changes in minimum wage or health care requirements impact your workforce?” Cho said. “Do you operate in a geography at high risk of a natural disaster? Do you rely heavily on seasonal workers? Understanding the potential risks facing you on a short and long-term basis is important for all small businesses. Once you have identified the threats to productivity, a clearer picture can be built around emergency planning and insurance needs.
- Time is money
One of the biggest mistakes small businesses make is forgetting to incorporate their time into a budget plan. You always work with people who are paid for their time. Timing underestimation directly increases costs and derails reputation amongst clients. For example, if you believe the project will finish on Friday, promise delivery on Monday so that if you finish on Friday, deliver the work early and become a star.
Treat your time like your money, and set external deadlines later than when you think the project will actually be done.
- Regularly recreate your budget
Your budget will never be static or consistent. It changes and evolve along with your business, and you will need to keep adjusting it based on your growth and profit patterns. Revise your monthly and annual budgets regularly to get a clearer, updated picture of your business finances. Take into account market trends from the previous year to help you determine what the year may look like.
Author: Gesture Chidhanguro