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Top 8 Budgeting Tips for Surviving Highs and Lows of Your Business
Budgeting does not have to be a burden all the time. Although we do not recommend it, a lot of businesses globally work without any budgetary plan in place. You may also be one amongst them (even though we hope it’s not the case at your end).
Being a business owner, one must realize that it is essential to have a grip on your finances and that is only possible when you have a budget.
A lot of business owners are aware of a few budgeting fundamentals, such as calculating revenue versus expenditures to find out profit attained. However, there are many other aspects businesses must take into consideration when making the financial budget.
Listed below are some useful tips for businesses for better financial budgeting:
1. Overestimating expenses, underestimating income:
As mentioned above, business owners do understand how to keep track of their revenue as well as expenses. But, it makes a whole lot of positive impact if you underestimate your income and overestimate your expenses.
By doing this, you can create a cushion if the actual figure does not match with what you’d estimated as a part of your financial budget. This kind of strategy also provides a bit of flexibility to the owners.
Abiding by a budget that is very rigid can be challenging. So, there is a balance that you need to maintain. If you are unable to keep track of your books, it is time to seek help from an expert accounting service provider.
2. Taking into account seasonal fluctuations:
Even though this may not be applicable on all businesses, but in case your business is a part of an industry segment that witnesses a period of slow-down during the specific term of the year, then it is essential for you to account for that fluctuation in your financial budget.
Certain business sectors those are likely to have extreme ebbs and flows comprise of lawn care, entertainment, construction, and tours and travels. Moreover, professional photographers generally witness a sluggish period of business followed by big-boom periods, such as wedding season in the summertime.
For those who have a business with seasonal variance in income, it is necessary to have a highly controlled management of income among other aspects. It’s furthermore recommended that you plan a complete year’s financial budget along with keeping up with your month-to-month budgets. You’ll have to think about the long run in such instances.
3. Expect the least expected:
As our lives, businesses too are unpredictable. As important as it is to create a financial budget, you must not blindly assume that the anticipated numbers are going to be the precise ones at the end of the month. As you would be doing with your individual finances, it is essential to keep a certain amount of cash separate every month in case of emergency or unexpected situations.
You never know if you need a new company pickup van if the existing one goes kaput, your computer system crashes for good and needs to be replaced. These are some critical ‘what-ifs’ to always bear in mind.
In order to maintain a financial cushion, under no circumstances, spend all your month’s profits. If you do so, you will find yourself you in a dangerous place which may necessitate that you apply for financial loans.
If you require assistance in managing your accounts or seeking financial reports to make timely decisions, hire an external accounting firm today to help you with the same.
4. Arrange for sizable purchases in advance:
Even though it’s in your best interest to keep money aside for unforeseen expenditures, it’s a no-brainer to make arrangements for more significant purchases that you are well aware of. For instance, it’s expected that whenever an unanticipated excess of revenue is available, one can find themselves in the position to spend on expanding the business.
Whenever you experience a substantial growth, you could be willing to invest in more machinery, supplies, or perhaps increase your team size. You would never want to see yourself being unable to make a critical purchase for the simple reason that you failed to do financial planning.
In case you anticipate a sizeable investment or expansion of your business in the coming months or the year, make sure to prepare yourself financially from this moment onwards.
5. Keep an eye on your cash flow:
It remains the fact that cash flow management is a lot easier said than done. Nevertheless, with regards to the cash flow, you must be aware of the numbers to keep yourself as well as your business above the water.
Companies that fail to manage their cash flow during the initial years of their starting up do not make it to their second year.
Some of the fundamental practices relating to cash flow management are monitoring the money that your clients owe you, the money you owe your vendors and needless to say strategizing for unforeseen expenditures. The overall aim is keeping the flow of cash in the green at all costs.
If you are not sure about the best way to keep track of your cash flow, seek the help of a reliable and experienced outsourced accounting firm.
6. Purchase software for managing your finance and accounting:
Consequently, in theory, you understand what you ought to do, however, how precisely do you monitor this data?
Excel spreadsheets are fantastic; however, they generally aren’t sufficient to handle the intricacy of business finances. Although you may have an overall concept of how spreadsheets, as well as the formulas work, making an extensive Excel spreadsheet to handle everything from earnings to payroll is very complicated.
For our clientele, we generally suggest that they purchase some accounting software to assist them in tracking their business finances. For those who aren’t confident which program to buy or perhaps require assistance in doing accounting using those programs, just let us know as we have a team that is expert in Xero accounting, QuickBooks accounting, and most of the other platforms available in the market these days.
7. Reviewing your budget on a monthly basis:
Whether annually or monthly, financial budges are not the documents that you set and then forget. In efforts to remain ahead of your business game, you must make a comparison between the actual results with your expected outcome on a monthly basis without any fail.
By doing so, you will be on your financial game and can also make required adjustments for the coming months. Even if you come to know that you have not been able to stick to your budget, the show must go on, and you should do all you can to adjust the subsequent month.
We all make mistakes but what matters is what we learn from our mistakes.
8. Seek the help of an accounting expert:
We all understand the fact that managing money is not a piece of cake, particularly with regards to businesses of any size.
Nevertheless, if you are unsure where to start from, how to manage your business finances or have been witnessing losses in business, please don’t hesitate to get in touch with us. This is what we are here for in the industry.
We, at Cogneesol, are one of the leading outsourced accounting firms across the globe and can help you with your end-to-end accounting, bookkeeping, financial reporting, payroll processing, and tax preparation requirements. Get started now!
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