15th: Prepare a budget and stick to it
Jul 31, 2023
The problem with budgeting is that it is often done in a safe, sterile environment where you do not factor in market instabilities, potential risks, and numerous other uncontrollable factors such as a pandemic, etc. The execution of the budget, however, happens in a dynamic environment where the suppliers can raise their prices and the government can change their taxes at any time.
Here are some ideas on how you can create a budget that is practically achievable-
- Thoroughly evaluate your company’s finances for at least 6 to 12 months before creating a budget. Each month’s sales and expenses will be different and the wider reference range will give you a more accurate idea.
- Overestimate your expenditures. Small businesses, often the new ones, fail to anticipate extra expenses that might occur such as losses due to expired products, broken goods, leaves of employees, cost of maintenance of goods, training employees, etc. When you add these insignificant expenses, they do not remain insignificant anymore. To shield yourself, always overestimate the expenses.
- Budget as per your sales cycle. For example; you may get plenty of sales during specific months, say the holiday season, summer, etc. Since it is already a booming time for your business, you may cut down your marketing cost and save that money for days when the business is low and marketing is needed.
- Involve your people while creating a budget. They have good on-ground knowledge and help you make a budget which is as per the industry standard. Their input can help you create a more practical budget.
- While most businesses make an annual budget, small businesses should revisit their budget every month or at least quarterly. Frequently revisiting your budget and making necessary changes will give you more control over your finances.
If you need help creating a budget, you can use free budgeting tools available online but make sure you do your own brainstorming. The tools are not always accurate.
