The world of small business is definitely a challenging one – many smaller enterprises operate on shoestring budgets and minimal funds in order to grow. Operating and making a success out of a small business is no easy feat, but it can be achieved with some smart moves.
If you were to ask smaller companies, their top constraint would probably be their tight budget. From start up costs to repaying back loans, there are a number of reasons working under a tight budget is both necessary and difficult. Sticking to that budget can make or break a company, so this post is here to offer some insights to help keep your finances in order and your head above water.
Be Liberal with Expense Estimates
One of the easiest ways to make your budget stretch a little farther is to overestimate your expenses. This works two-fold because many times there are unaccounted expenses that will need to be paid for across different projects. Better than that, though, if you keep under budget then you have extra funds to use elsewhere. Budgeting slightly above what you would normally expect to spend gives you a safety net so you will very rarely go over budget.
Understand/Prepare for Slow Times
It is crucial to understand your sales cycles, so that you can anticipate when work will be a little slower than usual. Sales cycles are common throughout business, and understanding them can help prepare your business for less money coming in. You can use that downtime to boost your branding through marketing and advertising, or just to take a back seat and focus your time elsewhere. Ultimately, funneling lots of cash into generating leads when you are in off-season could cripple your budget. So understanding and preparing for these slower times can do a lot to keep you in the black.
Regularly Assess Your Budget
Your budget will very rarely stay the same throughout a financial year, partly due to sales cycles and the growth of your business. As a result of this, it is important to regularly revisit and adjust your budget as required. This can be done quarterly or even monthly, as long as you are keeping it dynamic. Assessing your budget regularly is also a great way to understand where your money goes and how your finances look. If you have the information available, you can look at your previous financial year to project where you will be this year. As you understand your budget, you will be more accurate with future projections too.
Don’t Forget obligations to the ATO
This is a common pitfall for many small businesses
- Many businesses forget that whenever they pay employees, they also need to put aside money for pay as you go tax as well. The amount to put aside can be determined using MYOB, Xero or ATO published tax tables.
- Also its easy to forget GST. When customers have paid and money is in the bank account it could be tempting not to leave some aside for GST.
MYOB, Xero or spreadsheets are common and effective tools for creating budgets.