9 Small Business Tips to Maintain Your Budget

If you’re like many individuals and business owners, the topic of budgeting makes you squirm. Budgeting can be a challenge for families and businesses alike, but the process of setting financial goals and sticking within the numbers is important. Not only do you need to identify your financial structure, but it’s also important to maintain your budget going forward.

Every Business Needs a Budget

Why does it matter if you set a budget for your small business? The financial picture looks rosy when the profits are rolling in, but then things quickly go downhill if revenue is affected for some reason. Budgeting can feel like a burden, especially if you are confined to tight numbers. But it is an absolute essential if you want to protect the future of your business.

Regardless of your opinion about budgeting, when you set and maintain a budget you are creating a foundation of financial security for the future. Creating and honoring your business budget means that you have guidelines for spending. When difficult decisions come related to cost and cash flow, you can look to the numbers to determine the right choices based on the current needs of your company.

Here are a few reasons why budgeting should not be optional for businesses:

  • Know Your Goals: When you are throwing a dart, you don’t toss it without having a clear idea of where you want it to land. The target has colors and marks to indicate the accuracy of the throw. In the same way, a budget acts as the target for your company, giving you short-term and long-term financial goals that you should be aiming for at all times.
  • Determine Your Priorities: Another reason you need to maintain your budget is to keep business priorities at the top of mind. Every decision you make should have a purpose or meaning, which is why it is important to evaluate priorities when determining the right way to move forward. Budgeting keeps you focused on “true north,” outlining the decisions that should be made – and eliminating potential issues along the way.
  • Team Effort: At the same time, budgeting keeps all team members on the same page. When managers and staff members know the spending limits in specific categories, then they will work to honor the boundaries. As a result, detailed planning can be used to manage the funds available for each category, helping to leverage ROI and increase the overall outcome of the spending.
  • Measuring Your Progress: You can’t determine the true measure of your business success without measuring where you came from and where you are now. In addition to implementing good bookkeeping and accounting practices in your ongoing systems, it’s also smart to have checkpoints throughout the year to measure progress along the way. For example, audits need to be done to evaluate cash flow while also checking monthly and quarterly spending.
  • Protecting Profits: Even if sales are high and you are bringing in a lot of money, it can be hard to hold onto the cash if your spending is high. Good business management needs to focus on both AR and AP. Budgeting ensures that you are always spending less than you are bringing in.

If you are having a hard time seeing the reasons why it is essential to maintain your budget, then talk to an accountant about your concerns. Any financial professional will tell you that budgeting is one of the most important aspects of protecting your business profits. Without a strategic budget, you are setting your company up for failure in the future. Even though designing a budget and sticking to it can be difficult, it is a necessary step as a business owner.

Tips to Maintain Your Budget

Here are a few things that every business owner needs to keep in mind when it comes to bookkeeping and budgeting:

  1. Know Where You are Starting: As hard as it can be to look at the current situation, it is essential that you know your starting point. How much money are you spending in various categories right now? What are your current cash flow requirements? Getting a clear picture of your current situation, then creating a plan to fix potential problems, is one of the most valuable things that you can do to protect your business interests in the future.
  2. Identify Your Goals: Now that you know your starting point, what are your goals? When you maintain a budget, there is room to set immediate goals and long-term goals as well. Having these targets creates motivation to help you stay on track, even when things get rocky. Sit down with your accountant to map out a plan so you have a clear idea about the goals you should be reaching for.
  3. Be Realistic with the Numbers: How many times have you attempted a new budget, only to find that it’s hard to maintain because you were overly optimistic about your goals? If you don’t have realistic numbers, then it is nearly impossible to maintain your budget. When it comes to accounting and bookkeeping, slow and steady wins the race. Look for incremental changes that can be made to stay on track without putting undue pressure on the business. It’s always best to stick with conservative projections for both your income and expenses.
  4. Be Flexible When Needed: Just because you’ve set a budget, doesn’t mean there is no room for adjustments in the future. Sometimes, needs arise that require a bit of flexibility. If you don’t build in a bit of wiggle room, then it could result in potential failure when hard times come in the future. One option to maintain your budget while keeping a bit of flexibility is by having an extra fund to cover the gaps. Leaving a certain amount unallocated will allow you to see where the money is needed as you move forward with your new plan.
  5. Break Spending into Cost Categories: Find the most applicable categories that should be included in your budget, then look for ways that you can streamline spending and transactions in these categories. Some of the costs are fixed (such as your rent or insurance premiums), while others are variable costs that might change based on the current pricing of material and labor. It’s a good idea to build in a bit of flexibility for the variable categories.
  6. Create Responsibility and Accountability: Creating the best budget on paper doesn’t mean a thing if your team isn’t willing to stick to the plan. Not only do you need to assign responsibility for managing the numbers and spending, but it is also essential to build in systems of accountability for the future. People often have good intentions in the beginning, but things start to change through the day-to-day activities and stressors that come up. A critical step for ensuring the success of your new budget is to make sure that all individuals are held accountable for their part in the plan. This process needs to be a top-down approach, with managers who hold their teams accountable.
  7. Access Professional Services: Even though you have great business ideas or have a good knack for marketing, it doesn’t mean that your business savvy gives you the necessary experience needed to maintain your budget. More often than not, business owners have no formal history or experience with accounting or bookkeeping, which means a DIY approach can be disastrous. Investing in an accounting and bookkeeping team can be one of the best decisions you will make to manage your cash flow and stay on track with budgeting.
  8. Ongoing Consistency and Systems: How do you plan to check in your budgeting progress in the future? It is important to invest in the right budgeting and accounting software programs. These plug-and-play solutions are proven to keep the numbers organized, so you can stay on track with everything that is going on. But you need to be committed to creating the systems that will work best for your company – then maintain the consistency required for everything that is happening from one week to the next. When it comes to budgeting, accounting, and bookkeeping, the reports don’t mean anything if you don’t maintain consistency.
  9. Assess Ongoing Needs: Smart business owners reassess their budgets regularly. While the budgeting system can be a set-it-and-forget-it approach for a short time, it’s important to check in to determine how the systems are working. Often, a range of variables are impacting your spending and cash flow, so regular check-ins ensure that you are staying on track as things are shifting. Ideally, revisit the budget monthly to see where things are going well, and where you can identify areas of improvement.

Are you looking for ways to improve your current budget? Or do you need to start at the beginning to create a new budget for your business? One important aspect to maintain your budget is to ensure that you have a trusted accounting team to assist. For more information, talk to our experienced team at Easier Accounting. Call for a discussion about your business needs: (888) 620-0770.

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