With Brexit still being surrounded with so much uncertainty; not knowing how your business will be affected, not sure of the necessary steps you should or should not take and even being unsure if now is the right time to start up that company you’ve always dreamt of running, there is so much room to feel the need to panic. One thing we can be sure of is that none of us can ever be certain of what tomorrow holds. However, we can still plan for the best financial future. This is where budgeting comes in. Budgeting is a very important aspect of any business, which will help improve your business’ cash flow, reduce cost, improve profits and help your business to survive no matter what changes the economy is facing.
What Is A Business Budget?
A business budget is a plan to;
- Enable the business to meet its objectives and make confident financial decisions
- Ensure the business can fund its commitments
- Allow the business to allocate appropriate resources to projects
- Give the business a great ability to make continuous improvements and anticipate problems such as the need to raise finance or identify cash flow difficulties
The most important plan in any business budget should be to allow the business to plan for a great financial future.
Why is it important to Budget?
Imagine setting out on a 5-hour drive with no idea of how much petrol you have in your tank, what route to take or even if your car is fit enough to make the journey. You’re probably thinking you will still get there in the end and I’m sure you will too. However, without planning you will not only make it a longer journey but a very frustrating one too! Now replace your car with your business, where you are still the driver and the smooth and stress-free outcome of your journey depends on if and how well you budget and plan for the trip. Long story short; a business that doesn’t budget sets itself up for a host of financial problems down the road. So, allow your business plan and budget to be your road map to financial success.
Budgeting is a way of identifying available capital, planning for potential expenses and predicting incoming revenue. In other words; It allows you to create a financial plan so that you can be in control of how and when money is spent and monitor when money is expected.
Ensuring that you always have enough money for the resources that your business may require and for the payments that your business may owe to its suppliers. This will create a good cash flow.
I Have A Small Business Is A Budget Really Necessary?
It is easy to think that because you have a small business or because you don’t have much cash flow that you do not need to budget. Some small business owners may even think that budgeting is a waste of their time. Well, have I got news for you – Small business’ benefit from budgeting a lot more than you think! Small business budgets allow you to eliminate wasteful spending which can result in profitability a lot faster. This will ultimately help your company continue to grow. Your budget will show you how much you can spend each month and how much you can take out of the business for yourself.
How Do I Budget For a Start-Up?
The budgeting process for an existing business is slightly different to the budgeting process for a start-up. An existing business will have historic data, it is easier to look back at this data and plan more accurately for the future. Using historic data, you could plan for months even years ahead.
Startups, on the other hand, have no historic data and therefore are required to make assumptions which are then projected into the future. Some of these assumptions will include the answers to the questions such as;
- How will the products or services being sold be priced?
- What will the operating expenses be?
- What equipment/ resources will be required to start up the business and how much will this cost?
- How much money will need to be borrowed to start up and how much of this can be paid back monthly?
When budgeting for a start-up you should create a minimum of a 12-month plan which includes your expected Sales and Cost. It is important to remember that when starting up there may be a few times during the 12 months that you may need to re-visit your plan and make some adjustments according to the performance of the business.
So, if you are thinking about starting up a business, or maybe you are already in the full swing of things but the uncertainty surrounded by Brexit has got you reconsidering your business or even your personal financial position. Always remember that budgeting, planning and control is the basis for every business’ success. The economy will always change, however, as long as you are prepared; your business will always be ready to adapt to the changes.
At Outsourced we assist our clients budget and prepare a complete business. This helps them manage finances better and plan for exciting times ahead. Give us a ring today on 0208 249 6007 or email us on [email protected] and let us assist you with your business plan.
Written by Tricia Carr