All businesses need to budget, but this should not be a one-off, static process. Effective budgets require regular reviews, and a budget that is up to date allows you to manage your cash flow and to identify what needs doing in the next budgeting period.
What are the key things to consider in keeping your budget on track?
The most crucial element of any budget is your income and expenditure. You should compare your actual revenue against your forecasts and analyse the reasons for any shortfalls or unexpected increases. In addition to the amounts, you should also review timings to make sure that cash is coming into the business on time.
You should also look closely at your expenditure. Ask yourself:
It is essential to look at the timing of payments and check them against your supplier's terms.
It can be tempting to consider budgets as a purely financial issue, but of course, they ultimately impact on all aspects of the business. The most important factor is your sales. Whether you are dealing in physical goods or perhaps services, sales determine your income.
If you are not meeting your sales targets, then you need to look at why:
For most businesses, one of the highest costs they face is staff. People are a vital asset, but they are also an expensive one. There is a whole raft of things to consider here:
In addition to the costs of employing staff, such as salaries and pensions, there are other factors to consider too. If you have taken on more people, this may well lead to additional expenditure elsewhere, for example:
You also need to consider the services that your business is using. Services can encompass a broad range, but some common areas to consider are:
Do you own your premises or rent them? If you rent, then have you taken account of any increases that may occur? If you own your office, then have you factored in costs such as maintenance? You also need to look at energy costs, phone bills, insurance, business rates and more besides.
Contracts will cover many of these costs, so it's worth looking at the terms and determining whether there is any scope to renegotiate or switch suppliers to bring down the prices.
Modern business is often complicated. Whatever your core business may be, you will find yourself dealing with areas including accountancy, IT, telecoms, vehicle management and more.
One way of taking control over your budget and helping to free up more time to devote to your core activities is to consider outsourcing some of these services to specialists. Consider the following points:
Reviewing your budget is all about making sure that your business is in good shape. That may involve questioning some of your assumptions about the business and the way it works. It may seem painful at the time, but ultimately conducting regular reviews can help you build a more effective and profitable company.