Small Business Saturday Blog

Small Business Budgeting Tips

Monday, April 03 at 15:04
Budgeting Tips For Small Business | Business | Economy | Plan

With the UK economy predicted to continue to grow over the medium term, it’s easy to reap the benefits from increased demand for your products without thinking too far ahead. But could the future be even better for your business? You can start to find out by developing some form of forecast for your sales and costs. Maintaining a forecast will also help you re-plan your business if economic or new tax pressures suddenly mean your profits start to decline.
However, it’s likely that for the majority of small businesses, no actual budget exists. Well, certainly not written down on paper that can be referred to—we’re always far too busy to be planning for the next few weeks, let alone the next 12 months!
With that in mind, here are five suggestions to make your life a little easier and ensure that you can manage your costs, cash flow and profits.
1)      Make a plan
A proper business plan is ideal, but if you can’t stretch to that, put together a rough outline of your income and expenses together with when you expect to pay and receive monies. Check out some of the free templates online, such as those at the business planning site Teneric and business advice site SmallBusinessPro, to start the process.
At a minimum, a one-page spreadsheet summarising sales volume with all your expenses month by month should suffice. Adding your thoughts to paper not only crystallises ideas and anticipated goals in your mind, but it also helps you understand if you’re going to hit any financial targets.
A plan also assists with ensuring costs don’t go over budget. You can either adjust your financial projections or look at saving costs if you still want to achieve your objectives this year.
2)      Define your marketing tactics
It’s vital you have an idea of how you’re marketing to new and existing customers. Potential customers need to try your services at least once to become loyal users, whilst existing customers need to be brought back time and again.
Free trials, discounts or free upgrades are all tried and tested methods to get someone new to try your services. As it costs between four and 10 times more to acquire a new customer versus keeping an existing one, you also need to find ways to keep people that already know your about brand coming back.
Making sure people are informed and have your brand front of mind (without overdoing it!) is essential. Although email marketing still works well, social media channels such as Facebook, Twitter and Instagram to keep the communications flowing should be part of your marketing arsenal.
The cost is minimal to maintain a presence and keeps your customers in the loop with any new developments and news from your business.
3)      Over-account for all your costs
Do you ever get a bill in the post that’s higher than anticipated? We all do, and that’s why it’s important to over-forecast the cost side of your plan. If you want to accurately show costs as you believe they should be, then add a 10% compensation line just to play it safe. It’s far better to show (and easier to swallow) constant underspending each month than having large areas of red marked out because expenses appear to be uncontrollable.
4)      Know every cost line by heart and reduce where you can
When budgeting, it can be easy to miss out expense lines because they debit your bank account on an irregular basis such as one per year. To find all costs associated with your business go through your list of direct debits and standing orders whilst also browsing prior bank statements. You should find everything your business spends money on during this exercise.
To keep costs as low as possible, it’s essential you shop around for new deals from other suppliers. This is quite straightforward when it comes to insurance and utility bills. For example, comparing your electricity prices, water rates and business insurance options each year could literally save you thousands of pounds. All of those savings go straight to your bottom line.
5)      Revisit once per month
Now your budget plan is ready, it’s best to review its performance once per month, or every three months as a minimum. By doing this, you can see what costs are higher or lower than expected and adjust future months accordingly. You can also perform the same analysis on your sales numbers if things change in your operating environment.
After you have reforecast for the rest of the year, you’ll see if any changes to short or medium term tactics need changing to ensure you reach your original financial objectives.
Setting and reviewing a budget for a business is a relatively easy but often time-consuming task, especially if you don’t have the experience or handle on the financial aspects of business. However, for a business to survive and prosper, it’s an essential tool that helps achieve your financial objectives, lessons any shocks at year-end and saves money in the long term.
 By Jason Smith 
Jason Smith is a blogger and energy expert who has helped businesses increase their energy efficiency for over 10 years. Jason’s valuable expertise has helped thousands of companies cut their costs each year. He manages the website Business Electricity Prices, which advises small- and medium-sized businesses on reducing their utility bills, and continues to share his knowledge with the corporate world.

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