Managing your budget is crucial to your company’s success. It underpins your whole business operation. And if not correctly managed, your business can quickly end up in deep financial water.
But don’t worry. Because in this post will share 10 tips to help you manage your small business budget, including how to set a budget, keep track of your expenses, set financial goals, and more.
These tips can help you to manage your finances better and ensure the long-term success of your business.
#1 Set a budget and stick to it
The first step in managing a small budget is to set one. You do this by listing your expenses and organizing them into categories, such as “fixed” and “variable.”
Once done with your list, determine how much money you have coming in each month and subtract your expenses to see how much you have left over. If you’re spending more than you are bringing in, look for ways to cut costs or increase your income.
#2 Keep track of your expenses
While some items on a budget list are fixed costs, others are not, and it’s crucial that you track those expenses that are variable, such as fuel costs, energy bills, and food costs. Basically, you should track every business expense, both big and small.
To track expenses, you can:
- Use an app and update expenses in real time.
- Keep records of receipts for all your purchases
- Use a specific credit card for business-related expenses
#3 Set financial business goals
Your budget should work for you and enable you to hit your broader financial business goals. And if you’re budget is not aligned with these goals, then it’s time to take a step back and go back to the drawing board.
Some examples of financial goals for a small business might include:
- Increasing your revenue by a certain amount within a certain timeframe
- Paying off a specific debt or loan
- Building up a certain amount of saving
#4 Negotiate with suppliers and vendors
Negotiating with suppliers and vendors should be part of your budget strategy. You can reduce expenses on the goods and services you use in your business by working out better terms.
Use these tips to help you negotiate better:
Do your homework: Before negotiating, gather as much information as possible about the goods or services you are purchasing, including market rates, the quality of the product, and the reputation of the supplier or vendor.
Know your limits: Determine your budget and the lowest price you are willing to pay before entering into negotiations.
Be prepared to walk away: If the supplier or vendor is unwilling to meet your terms, don’t be afraid to walk away and find a new vendor.
#5 Look for ways to reduce your overhead costs
Reducing overhead costs is a crucial strategy for managing a small business budget. Overhead costs are the expenses that your business regularly incurs, such as rent, utilities, and insurance.
Finding ways to reduce these costs can free up more money to invest in other areas of your business.
Some ways to reduce overheads include:
- Renegotiating your rent or lease terms.
- Shopping around for better rates on things like insurance and utilities
- Reviewing your current contracts and looking for ways to negotiate better terms
#6 Outsource non-essential tasks
Trying to do everything yourself to save money can be tempting. However, this can often lead to burnout and decreased productivity. Instead, consider outsourcing non-essential tasks to freelancers or other companies.
Outsourcing non-essential tasks is a great way to scale your business without hiring full-time employees. It’s also budget-friendly! But, best of all, it frees up your time and allows you to focus on the critical aspects of your business (the areas that push it forward).
#7 Take advantage of tax breaks and credits
It’s essential to take advantage of all of the tax breaks and credits available to you. These special provisions, offered by the government, can help you to reduce your tax burden and keep more of your hard-earned profits.
There are many tax breaks and credits available to small businesses that can help to save you money – such as:
- The Small Business Health Care Tax Credit provides a credit to small businesses that offer health insurance to their employees.
- The Work Opportunity Tax Credit provides a credit to businesses that hire individuals from certain disadvantaged groups.
- The Energy Efficient Commercial Buildings Tax Deduction provides a deduction for businesses that make energy-efficient improvements to their buildings.
#8 Use technology to your advantage
In today’s digital age, many tools and technologies are available to help small businesses save money and improve their operations. Using technology to your advantage can streamline processes, reduce costs, and increase productivity.
Investing in technology allows you to:
Streamline processes: By using technology to automate or streamline business processes, you can save time and reduce the need for manual labor.
Reduce costs: Technologies such as cloud-based storage solutions and web solutions can help you to save on upfront costs and reduce the need for IT support.
Increase productivity: Using tools such as project management software and virtual meeting platforms can improve communication and collaboration within your team, which can lead to increased productivity.
#9 Make a plan for unexpected expenses
Even with the best budget and financial planning, unexpected expenses can arise. That’s why it’s essential to have a plan in place to deal with these situations.
One way to do this is to set aside a certain amount of money each month in a “rainy day” fund. That way, when unexpected expenses do come up, you will have some extra cash on hand to cover them.
To plan for unexpected expenses:
- Determine how much money you want to set aside each month for unforeseen expenses
- Decide where you will keep this money (e.g., a separate savings account)
- Make a plan for using this money if you need to (e.g., for unexpected repairs or equipment purchases)
#10 Seek out financial assistance and support
As a small business owner, it’s important to be proactive in seeking financial assistance and support when needed. Luckily there are many resources available to small businesses that can help you get the funding and support you need to grow and succeed.
Some examples of financial assistance and support that may be available to your business include the following:
Small business loans: There are many types of small business loans available, including traditional bank loans, SBA loans, and alternative lending options.
Grants: Grants are financial awards given to businesses for a specific purpose, such as research and development or community development.
Financial advisors and accountants: Working with a financial advisor or accountant can help you better understand and manage your finances.
Business training: Participating in business training programs and workshops can give you the knowledge and skills to manage your budget and finances effectively. Organizations like SCORE and the Small Business Administration offer these resources at little or no cost.
Managing a small business budget requires careful planning and attention to detail. Remember, the key is to set a budget, keep track of your expenses, set financial goals, and prepare for unexpected costs.