When you run a business it’s often hard to keep track of money. When you start the venture, money seemingly flows the wrong way out the door until you’ve got your client base. Once you’re established and money is flowing both in and out of the business, it’s often still tricky to keep a handle on things. Whether you’re good with money or not, your business needs a budget.
Having a budget is paramount for various reasons. You can minimise unexpected cash flow issues and control spending. You also reduce the risk, by keeping within the budget put into place. You can make better decisions, informed ones at that. You’ll ask yourself questions like “What will spending this money result in?” or “Could this money be better utilised elsewhere? Putting a budget into place is good for the health of your company and the future of the business.
If you work for yourself you are answerable to yourself. So many businesses fail within the first 18 months because they simply do not have a grasp on their finances. You can’t set up a business which has £4000 start-up costs and monthly bills of £500 if you have £2000. This is basic maths. Having a budget means you are putting something into position to help you make decisions. If you budget £300 to spend on office equipment or a new range of products to sell, stick to the £300. When you budget it, write it down and you won’t spend more than you should. If you do, you’re not making sensible decisions. If you have a team of people working for you, a budget is so important to keep things in order. They are essentially spending your money so you need to know what is being spent and on what. If the company needs paper for printers, this costs money. So it should be in a monthly budget for office costs. If you need more, this is going to cost more so the money needs to come from somewhere. However, if the numbers don’t stack up, cuts need to be made in another area of the business to accommodate this expense. This basic example should illustrate that your business needs a budget.
Once your start-up costs are out of the way your monthly running costs should remain fixed. This means a fixed budget to operate the business. Having figures which show what money is flowing into and out of the business is essential to see the overall state of the business. You’ll see how much profit you’re making and how much you can afford to pay yourself and reinvest into the business to grow. All of this, without a budget, is simply numbers floating around the air. To create a successful business you need to catch those floating numbers in a big net and get to grips with them. This is where a bookkeeper is worth their weight in gold. Whilst they are an expense, they can also show you how to budget properly, point out areas where savings could be made and show you the real figures. By shining a light on budgets and where you are perhaps overspending, your business figures will fall into line in no time. Setting up a business? Your business needs a budget!
