Small business budgeting tips: The 15 ‘R’s to success
Most small business owners have a budget, but many don’t use it to its full effect. This can have a negative impact on cash flow, which for small businesses can have devastating consequences.
So, here are 15 tips to help you make the most of your budget and maximise your chances of success.
1. Be REALISTIC
Most of your budgeting will involve predicting your upcoming incomings and outgoings rather than relying on actual figures.
Being realistic in this process will increase your chances of success.
Overestimating your cash flow could lead to serious difficulties when you don’t have enough working capital to meet your requirements, whilst underestimating it could result in you missing new opportunities which are well within your capabilities.
2. REVIEW all expenses
It’s important that you analyse all expenses and not just the large ones.
Whilst a few pounds here and there might not seem like a huge concern, those small expenses can quickly add up to become a big drain on your cash flow.
During this process, it’s also important to identify your essential expenses such as payroll, taxes and rent and your non-essential expenses that your business can live without.
When money is tight you don’t want to be wasting money on the non-essentials.
3. Regularly REVISIT your budget
Budgeting should be an ongoing process that changes with your business.
So, make sure you revisit your budget regularly and update it with new cash flow projections and realistic spending categories.
This will ensure that your budget reflects your business and its evolving needs.
4. REDUCE costs
Looking for ways to reduce your business costs can give you more flexibility in your budget.
But, when looking for ways to reduce your spending remember that the cheapest option isn’t always the best option, especially if it compromises on quality.
5. Analyse RISKS
It’s important to understand the risks facing your business and how they could impact your company financially and your ability to accurately plan for the future.
For example, what impact would a change to the minimum wage have on your business? Do you have a seasonal sales cycle? Is your location at high risk of a natural disaster?
Any potential threats should be planned for and/or insured against so that your business isn’t caught short.
6. RECRUIT the right people
Recruitment can be expensive, so hiring the right person the first time – and having the processes and expertise in place to help you do that – can be a massive cost saving.
Also, keeping your existing employees happy, supported and motivated in their role could help you to retain them and avoid the need to find a replacement.
7. RETAIN clients
Whilst winning new clients is great, it often costs more to secure a new client than it does to sell to an existing client.
Therefore, it’s beneficial to retain and bring added value to the clients you already have so that they bring you repeat business and refer your services to their friends.
You could, for instance, run a reward or loyalty system or offer special discounts to your valued customers.
8. REFLECT on past experiences
As with most business tasks, it’s important to learn from your successes and your mistakes.
So, regularly look back at past iterations of your budget to see where you were right with your projections – and where you weren’t.
This will help you to improve its accuracy going forward so that your budget is based on the right information and gives your business the best possible chance of success.
9. Share RESPONSIBILITY
For the biggest chances of success, your business budget should be a companywide priority.
Communicate the importance of cash flow to your employees so that they keep it front of mind.
And be sure to budget by department so that each section of your business has responsibility for their spending.
10. REWARD employees
Don’t overlook the important role your staff can have on your budget. It can be beneficial to reward your employees for meeting budget goals.
This could be the necessary motivation to ensure that they stick to their budgets.
11. RAISE the right funding
If your business needs a cash flow boost it’s essential that you find the most suitable solution for your needs.
Whilst many think that having any funding at all is good for business, relying on the wrong facility for your needs can actually be doing more harm than good.
A commercial finance broker can help with this process as they will get to know your business and its ambitions and then use their extensive knowledge of the market to highlight the best options for your specific needs.
12. RESERVE some cash
If your business is lucky enough to have excess profits, it’s good practice to keep some of this aside – perhaps in a savings account – so that you can cover unexpected payments or take advantage of new opportunities as they arise when you might otherwise not be able to.
13. RECOGNISE when you need help
If you are struggling to keep on top of everything it’s important to recognise when to bring in help.
For example, whilst recruiting permanent staff comes with costs such as training, holiday and sick pay, outsourcing tasks to a third party can bring in additional expertise without the hidden expenses.
There’s also lots of support out there when it comes to cash flow management and raising finance. This can help you to keep your costs down and your business performance up.
14. RECOVER debts
When a customer pays late it can put significant strain on your cash flow.
For this reason, it’s important that you have an efficient and effective credit control procedure in place to ensure that you get paid as quickly as possible and limit the damage to your business.
If you have a number of debts which remain outstanding you could benefit from the help of a debt collection agency who will use their expertise to recover payments whilst you concentrate on other aspects of your business.
15. REMEMBER that cash is king
No two businesses are the same, and as a result they will all approach their budgeting in slightly different ways. But the most important thing to remember is that a healthy cash flow is vital for business success. So, don’t ignore it. Start taking the steps now to ensure that your budgeting sets your business up for success.
If you’re struggling to maintain a healthy cash flow we could help by introducing the most suitable funding facilities for your needs. Contact us today on 0800 9774833 to discuss your requirements with a member of our team.
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