Do you feel in control of your expenses as a business? If not, then you really should consider prioritising a business budget to help you manage your finances.
By having a budget in place, you can gain valuable insight into what you and your team are currently spending money on and where there are cost-savings to be made. Perhaps you're not investing enough in staff training and self-development, or you may find that you're wasting money by overbuying stock and supplies. Whatever the case may be, business budgeting can help you track and forecast your expenses to ensure that you are financially stable and able to reach your long-term goals.
In this guide, we discuss what business budgeting is and why it is important for a business. We also share with you our 5 top tips for sticking to one.
Table of Contents
- What is a Business Budget?
- Why Is Budgeting Important For A Business?
- 5 Top Tips to Stick to a Business Budget
What is a Business Budget?
A business budget is a financial plan for your company's future expenses and income. It should include projected costs for things like materials, salaries, and overhead, as well as estimated revenue from sales or investments. One of the main benefits of budgeting in business is to make submitting your tax return easier. It also helps you plan for things like expansions or upgrades and track your progress towards your financial future.
By creating and regularly reviewing your budget, you can make sure that you're not overspending in any one area. A business budget can also help you to refocus your financial attention on areas of your business that could help generate more income and move away from those that aren't performing as well. This means that you can track performance and ROI when reinvesting money back into your company.
A business budget tends to be set at the start of the financial year, and for many businesses in the UK it runs from April to March in line with the tax year. However, budgeting is not a one-time event - it should be monitored and updated regularly. Some businesses choose to use Excel, Google docs, online budgeting software, or even expense apps to track their financial activity. But how you set your budget comes down to personal preference and what works best for your company at the end of the day.
Why Is Budgeting Important For A Business?
While setting your business a monthly or annual budget might seem like a task that could be put on the back burner, it is essential for your success. Not only does it enable you, as the owner, to gain a better understanding of your company's finances, but it can empower your senior members of staff to invest in aspects of the business that are doing well, such as putting money towards paid ad campaigns, increasing spend on social media marketing, or investing in staff training.
A budget also helps to prevent you from overspending and potentially heading towards financial trouble. It's important to set aside money for unexpected expenses, such as repairs or emergencies so that your business is prepared for any potential roadblocks. But you should also have money set aside for innovation and creativity. This allows you to get experimental with new ways to expand and advance without the risk of overspending or having to let members of your team go.
Another reason why budgeting is important for a business is that it makes securing investment a smoother process. Whether you are seeking funding from a bank, investors, or even crowdfunding, having a clear and detailed budget in place shows that your company is organised and financially stable. And anyone considering investing in your company will really appreciate the fact that you have financial objectives, insight, and records. It helps to reflect your dedication and professionalism as a business owner and will help you gain trust.
5 Top Tips to Stick to a Business Budget
Now that we've covered what a business budget is and why it is important, here are our top tips for sticking to one:
Analyse Your Risks
If you work within a highly competitive market, it is vital that you understand what risks you may face in the near future. This could include things like a new competitor entering your market, changes in consumer behaviour, or fluctuations in the economy. This will help you to set aside money for potential challenges and create a realistic budget that takes risks into account.
Make sure to plan at least one year ahead when creating your budget. Set long-term goals for your business and think about how to allocate your funds in a way that will help you reach those objectives.
Use an Expense App
One of the most effective ways of sticking to a budget as a business is by using an expenses app to keep an eye on how much you spend in relation to your revenue. This also makes it easier for staff to track their expenses and submit them for reimbursement. Feel free to book a free demo of our user-friendly business expenses app here.
Be Transparent and Clear
Make sure that your budget is clear to both yourself and any members of staff who may be managing it. Transparency is key in ensuring that everyone stays on track with spending. Plus, if everyone knows exactly where your company is heading in the next couple of years, they are more likely to be motivated and on board with any changes or budget cuts that may need to be made.
Check in with your budget regularly, at least every quarter, to ensure that you are still on track with your financial objectives. This will give you the opportunity to reassess and make any necessary changes to your budget. But remember to be flexible when it comes to your finances. There will be times when you need to spend a little more or less than what you have planned. Just make sure that any deviations from your budget have a clear purpose and will benefit the overall success of your business.