For any SMEs around the world, survival is tough, especially in Singapore. Entrepreneurs are faced with never-ending challenges such as innovation, competition, brand reputation, workforce shortage, reduced cash flow, and economic downturn.
We all know how the multiple crises have affected every industry these days. But despite this fact, many of those who persevered, including emerging businesses, have proved that expanding capacities and investing during this difficult time can still be beneficial.
So, rather than playing it safe and waiting for things to be better. Why don’t we spend our energy putting our business in a better position through various means, such as learning how to manage a budget in business?
But why budgeting? Well, according to Seamus Roddy of Clutch, in a U.S. survey conducted, it was found that half of the small businesses see budgets as something unessential resulting in the absence of any formally documented budgets in the year 2020.
Small businesses tend to forego financial planning because the company has a smaller scope, making it easier to track sales and expenditures. However, unknowingly without budgeting, it would be hard to determine financial progress, accurate losses, or even make business decisions that could have been supplemented with the use of data.
So, if you’re a start-up aiming to improve your finances, or a mid-level business planning to scale your business soon. Read up and get ready to manage your financial goals effectively as this article will encourage you to start learning budgeting strategies for businesses.
What is budgeting in business?
Similar to the concept of regular budgeting, budgeting in a business is a financial plan covering the revenues and costs of a business.
Unlike personal budgets, dealing with business accounts is more complicated since different factors come into play. The business itself gets involved, not to mention, including the employees, operation, production, and so on. But if you are able to handle your financial statements, this should not be something new to you.
Why is budgeting important to business?
Kowing your business budget gives you an overview of your resources, the limits of your expenses, and probable sources of revenues. It’s an important tool that guides you on how to make judgments when faced with issues such as unexpected downfalls. It could also act as a predictor of future ins and outs of your cash flow.
When you have control of your business finances, you become open to possibilities that allow growth. With enough cash allocation, it’s easier to make choices that will help improve the financial standing of a company.
Additionally, by knowing your figures, you could also improve resource allocation by funding more on what generates greater sales and cutting on business costs.
What are the budgeting strategies for small businesses?
There are many different ways to do budgeting for small businesses, but these 5 tips should help you start clearly, whether or not you’re new to budgeting.
- Determine changes to your system that may have an impact on your business funds for the whole year.
Ideally, this must be done annually. Every first month of the year, you need to take note of all the changes in your expenses and update your records.
For example, if you have a service type of business and are seeing a rise of consumers going online for options. This should give you a hint that investing in professional website development can be your next move.
With this in mind, you know very well that it could be an added expense for your business. So, if you’re already paying for a web developer, putting on extra tasks and hours could mean a little more money out of your pocket.
If you have a few employees, there could be changes in your national or local laws that might dictate the need for an increase in their daily pay. All these things must be taken into account as they are fixed increases that could affect your budget.
- Predict additional business expenses.
Is there anything that needs updating? Perhaps a software? Or do you think adding automated solutions might benefit your business?
Knowing these required upgrades will help you plan your finances better. And if there are limitations that will keep you from moving forward, you’d know how to approach them by prioritizing certain projects.
By seriously considering business accounting, strategic planning becomes an easier process. Without knowing the current environment of your company such as its financial standing, it would be hard to formulate a strategy that can help increase profits and improve business operations.
- Evaluate your revenues and expenses.
Have you ever wondered if your earnings are not giving your business some room for growth? Keeping your prices low might be something you’d really love to keep for your customers, but if you think the benefits have already become more one-sided then it’s time to do some reality check.
A lot of things can affect the increase of your expenses versus your revenues such as high bills and other operational costs. That is why keeping a close look at the figures, monitoring, and comparing them will help you understand and decide whether or not you should be doing some adjustments to the prices of your products or services.
You can do this by pulling out your yearly financial record and compare the years you’ve been operational. Check your businesses’ growth and see if it’s justifiable over time.
- Plan for the right goals and strategies
Now that you know the actual situation of your company, it’s time to set some goals and allow growth.
Looking at how your business is doing, you must have a set of objectives you wish to attain for the following year or so. Take one target at a time and start with something short-term. With enough resources allocated, you can test out the project according to the set budget and modify it depending on its actual outcomes.
Once you see your goals slowly turning into a success, you’d appreciate how strategic planning for the finance department plays a role in keeping your company more vulnerable for opportunities for advancement.
- Review your goals monthly.
Goals can’t just stay unrealized, they must be fulfilled for your business to witness progress. To do that, you need to keep them realistic.
Try to do a monthly check on the projects you have satisfactorily achieved and see which of those goals need some pushing. Also, recognize the factors that contributed to the success or failure of your targets. Once you’ve monitored these things, you’d be more adept at meeting your aims.
Budgeting strategies may sound complicated, time-consuming, or may even seem unnecessary, but the truth is, it offers so much information that the health of your business could depend on it. So, if you are planning to combat the challenges that all entrepreneurs are currently battling, it’s time to make changes to your financial handling by adopting effective budgeting strategies and see better projections in your business.