Approaches to Business Budgeting that align with your goals
For businesses, particularly small businesses, preparation, and budgeting go hand-in-hand. Whether you’re running your first marathon, writing an exam, or starting a business, you must prepare and plan if you want to succeed. When you plan sufficiently and budget effectively, you set yourself up to achieve your business and financial goals.
Often, small business owners start out running their businesses in a relaxed fashion, not taking the time to draw up a comprehensive budget and business plan.
But budgeting helps SME owners to:
1. Manage their money proactively,
2. Allocate resources effectively,
3. Curb runaway spending,
4. Make better decisions,
5. Monitor performance,
6. Identify issues, and
7. Plan for the future.
Different approaches to budgeting for small businesses
A business budget should provide an overview of the business’s finances. It should also outline your current financial situation and your long-term financial goals.
The aim of creating a budget is to make sure that you have enough money to cover your expenses and meet your desired objectives. With this in mind, you might want to base your budget around specific goals.
For example, you can develop a budget with specific profit forecasts in mind. Decide how much profit you want to make and work backwards to align your budget goals with these figures. A profit-focused approach to budgeting aims to increase sales without also increasing expenses. So, it’s about finding ways to work smarter and more efficiently.
For other businesses, growth is the goal.
Creating a growth-focused budget demands that you close any gaps that might be hindering business growth. This could entail spending more money on training, for example, so that your team has the skills needed to support expansion. Or it could mean allocating funding towards an investment in, or purchase of, another business or new equipment.
Sometimes you have to adjust your budget because the business landscape has changed. Many of us experienced this in 2020 due to the COVID-19 pandemic. When markets are challenging and economies sluggish, a cost-control focused budget will serve you best. These budgets are designed to help you survive the storm. The severity of the cost-control measures you put in place depends entirely on the business’s financial position and the severity of the market downturn.