Running a business isn’t always easy. There are a lot of different factors to consider and a lot of different things to keep track of. This is especially true when it comes to budgeting. After all, it takes more than a little bit of planning to be able to take care of your employees and keep your business afloat. It’s easy to get caught up in the day-to-day activities and not worry about the big picture.
To be effective with your budget, you need to know what your priorities are. Our budgets need to be customised to the individual. We all have different needs and different situations. The best way to start is to create a simple budget with zero in all the categories. Put your current spending in each category and then estimate your new expenses for the coming month. Now, start moving the money around. Take the money out of the things you spend the most on, and put it into the things you spend on the least. Is there something you could cut out altogether?
Create a detailed budget plan
A detailed budget plan is the first step in any budgeting process. The most important aspect of creating a detailed budget plan is to decide on your spending categories. This is where you will be able to see where your money is actually going and how you can start doing business within your means. The easiest way to do this is to divide income into categories that make sense for your business. You could create as many categories to divide your income into.
Use a direct debit service
If you have a business of any size, chances are you have customers that pay you on a regular basis. Since this is the case, it would make sense to automate their payments and make it as easy as possible for them to pay. This is why you should be using a direct debit service. A direct debit service is a service that will allow you to pull out direct debits on your customers’ bank accounts on a regular basis. If you choose to receive your customers’ payments this way, they will make an initial deposit into a specified bank account. You can even customise your direct debit to better suit your customers’ and your needs. The service will then automatically deduct this amount from your customer’s bank accounts and deposit the funds into your account on a regular basis. This will not only save you time, but it will also ensure that you are paid on time, and you won’t have to worry about making sure that you have enough money in your account to pay for expenses.
Have a budgeting team look at your plan
When you are trying to figure out your budget, you should do it with a team. Your own opinion is sometimes clouded by your own thoughts and fears. You can get a team together and talk about the good and bad of your plan. You will be able to see the aspects of your plan that may not have worked and fix them before you start.
Understand your sales cycle and spending needs
Every business has a different sales cycle. Some businesses have a short sales cycle (like Amazon), while others have a longer sales cycle (like a dentist’s office). You must understand the amount of time it takes to get a sale and the amount of time it takes to get paid. This process is called receivables. You must understand this factor when budgeting for cash flow.
A business that doesn’t understand the company’s sales cycle and spending needs is much more likely to run into cash flow problems and make poor budgeting decisions. Yet, even today, most small business owners still don’t fully understand their sales cycle and spending needs. For example, a business owner with a 12-month sales cycle might get nervous when sales dip in month 10. Yet, that dip is normal. Sales tend to slow down toward the end of the cycle and pick back up again in month 12. Plan ahead by monitoring your sales cycle to know how much cash you will need to make through the cycle.