When developing your business budget, it’s easy to forget some common-sense principles. Boost your budget’s durability with these 8 budgeting tips for smarter finances.
1. Establish financial goals
You may have a rosy long-term vision for your business, but the only way to achieve that is to set periodic revenue goals. Breaking down goals into monthly, weekly, or even daily targets can help you stay on track and make necessary changes in real time. With incremental goals, you’ll be on top of your game and have a concrete barometer of success. This will help boost your business efficiency and entrepreneurial confidence at the same time.
2. Overestimate expenses
Life and business are full of surprises. When budgeting for expenses, remember to expect the unexpected. Almost every project comes along with unforeseen costs, so anticipate the unknown. Prepare your budget by slightly inflating line-item projected expenses. Over-projecting costs will give you security and peace of mind. You’ll sleep well, knowing your budget can withstand those financial curveballs.
3. Remember that time is money, too
Just like unexpected expenses, timing underestimation increases costs. Treat time like money by anticipating delays and working them into your budget. If you pay contractors on an hourly basis, inflate the projected time you think it will take them to finish a project. When dealing with clients, tell them to expect work completed at a later date than you actually think it will be done. The happiest clients belong to businesses that over deliver on their promises.
4. Find the experts
Unless you are an accounting whiz, you need someone you can rely on to do all of the books for your business. Having a business finance expert or team of experts on your side is the best way to avoid financial pitfalls. A business finance expert can review your expenses, stress-test your budget, and point out weak spots you may have missed on your own.
5. Keep every dollar on a leash
Successful business people don’t just develop a lean budget, they also exercise discipline by sticking to it. The best-laid plans can fail when businesses spend money on travel, events, trade shows, and new hires that are not budgeted. Exercise the same caution when using your line of credit. Short-term cash needs are a resourceful use of credit. Long-term funding needs, such as marketing expenses, are not. Misguided use of credit can lead to major financial troubles for your business, so consult with an expert before making important credit decisions.
6. Monitor and measure performance
Great business owners have a finger on the financial pulse of their business at all times. You’ll need to keep tabs on the movement of your money, especially when large amounts are involved. You can accomplish this by comparing current statements with past financial statements. Use this information to project your future revenue, expenses and cash flow. Having the pertinent data at your fingertips will help you make informed decisions for your business.
7. Be prepared for downturns
Every small business has its ups and downs. Cash flow problems arise during seasonal slow periods. Late-paying customers can cause unexpected shortfall. In these situations, having a relationship with a lender can get your business through the tight times. If traditional borrowing is not an option, invoice factoring, or having a third party “buy” your accounts receivable at a discount, can help keep your business afloat.
8. Stay up-to-date with the YBO blog
Stay in the know and avoid common business blunders by reading our monthly blog. We’ll keep you aware, educated, and informed about best business financial practices. Knowledge is power, so keep reading, and keep getting practical insights that help secure your business finances.