Categorised | Business & Finance

Creating An Accurate Business Budget

Whatever line of industry you are in, you will need to always maintain tight control of your spending. No business can function without expenditure, but everything that you spend should be rationalized and as a result, should be a sound and commercial decision.

Essentially, your expenditure should serve the purpose of driving your business forward, and if it does not do this in any way, then it need not be there at all as it is cutting into your bottom line. 

Creating an accurate and watertight budget for your business and reviewing it periodically is fundamental for maximizing your potential for success and propelling your business forward. 

Identifying The Financial Needs Of Your Business

Understanding what your business needs are will be important if you are to ensure that a full and accurate budget is created. To do this you should factor every type of expense that you may come across. 

While you do not need to go into the minute details at this stage, you should just understand that your IT company may need a budget for new terminals or upgrades. Your fuel processing company may need a cooling tower installing, and a hairdresser may need to budget for additional seats of hair dryers. 

Your budget will tie in with your business development plans, and you will need to understand how you will achieve the aims of your plans and what type of spending will be involved in these. 

Avoiding False Economies In Your Budget

There are a number of false economies that you may wish to avoid when budgeting. Staffing costs may often provide challenging to balance in many lines of business. The tendency for many businesses when it comes to staffing costs is to reduce these as much as possible. As one of the expenses that are the easiest to reduce, staffing costs often get cut. This is usually done by reducing the number of workers, the number of hours that are working, or by keeping salaries as low as possible. 

While it is always possible that you are overstaffed. And if demand drops for your services, then you should be able to review these costs further. However, if you are cutting spending on staffing and then leaving yourself so short-staffed that you are unable to meet demand, then this was a poor business decision as it will affect your sales. 

When making any budget cuts, think of the wider pressure that it will cause to productivity and also consider the morale of your team when you apply this logic. 

Build In A Contingency In Your Budget

Overspends are often commonplace when it comes to budgets. Often something unforeseen may come up and knock you off course and you may end up behind budget.  However, this can easily be avoided when you ensure that you keep a contingency for emergency spending within your budget. This will mean that you are more likely to come in within your budget whenever you review your performance.

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