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Putting budgets in place for your small business may not be something you’ve considered yet. However managing your finances sensibly means you’ll keep your cash flow nice and healthy and you’ll cut back on overspending. Poor cash flow is the most common cause for business failure.
Before you even start your business you should write a business plan. This is an important aspect of getting your business started. Reviewing your business plan from time to time will show you whether or not you’re on track when it comes to your goals and ambitions. Mapping out your objectives and setting a business strategy is key to your success.
It’s easy to just keep spending and forgetting to review all of your expenses. Burying your head in the sand when it comes to your expenses means you don’t have a true picture of how much you’re actually spending. You may be really shocked to see how much you do actually spend each month. Highlighting whether or not these outgoings are essential means you can start to cut back on your spending and start sticking to a budget.
Review your spending month on month and set yourself a realistic budget. The budget you set must allow you to save, pay yourself and employees if applicable and your suppliers. This should also leave you some money in the bank. If it doesn’t this will highlight that your budget needs cutting back.
How can I ensure I stick to a budget?
Business bank account
First off you should have a separate business account for all of your business transactions. Whether you’re a sole transfer or limited company it will mean your bookkeeping is much easier to manage and you know that everything coming in and out of the account is business related. This will give you a much clearer picture of your finances and it’s actually a legality for limited companies.
Expense recording
Having a process in place for recording all of your expenses is essential for accurate record keeping. We use Dext for all of our clients to ensure no receipts go missing and that everything pulls through to QuickBooks or Xero for payment and reconciliation. You’ll also be able to export reports that show how much you’re spending each month.
Understanding your cash flow
Facing the reality of your cash flow means you can act now before it’s too late. When you use our bookkeeping service, we are able to highlight particular times of the month where cash flow seems to drop. We can then act upon this and put steps in place to improve it. It may just be that you have clients who don’t pay you on time and we need to get on top of your credit control process or that you have lots of expenses going out at once. We can liaise with your suppliers to agree better payment terms. There are lots of ways we can help with your cash flow, so don’t be afraid to reach out.
Allow for contingencies
When setting a monthly budget, allow for contingencies. Business doesn’t always go to plan, so having a backup of money you can fall back on will mean you stay out of the red. Once you get into the red it’s much more difficult to get out of.
Save for tax and VAT
If you’re a VAT registered business make sure that any VAT you receive goes straight into a savings account or savings space ready to pay your VAT bill. Save a third of all revenue ready for your tax bill so you have no nasty surprises.
Our final tip would be that if money and numbers really aren’t your thing and you find it difficult to manage, then you should invest in our bookkeeping services. Our monthly fees are tax deductible and hiring an expert means you’re compliant with all legislation. You’ll have a much better insight into your financial situation. Having us by your side means your business will start to head in the right direction for success!
