Budgeting is one of the cornerstones of effective, efficient money management. If you run a business, it’s crucial to utilise budgeting to oversee and regulate spending and monitor cash flow. Cash flow issues are one of the most common causes of new company failure. Accounting isn’t always easy, especially if you don’t have experience or a background in finance. In this guide for entrepreneurs, we’ll outline some handy hacks to simplify business budgeting.
Separate your business and personal accounts
The first step for any entrepreneur, whether you run an established company or a brand-new remote venture, is to separate your business and personal accounts. Business finances are more complex than personal accounting and there are different requirements in terms of paying taxes and calculating profits, deductions and revenues. Having distinctive accounts can help you manage both your personal and business accounts more efficiently and effectively.
Use purchase orders
If you buy goods or services from suppliers, other companies or manufacturers, it’s beneficial to consider using purchase orders. If you’re new to this term, the simple answer to the question, ‘What is a purchase order?’ is a written agreement, which outlines a request for goods or services from a supplier. Using a purchase order can help to streamline the order process, but crucially, it’s also beneficial for budgeting. A purchase order enables you to budget using accurate data. With purchase orders, you know how you’re spending before the invoice arrives. You also have to pre-approve the request, which means there are no surprise bills down the line. Purchase order automation can make tracking expenses even easier. When you use automated tools rather than manual processes, you’ll save time and money and reduce the risk of mistakes.
Establish financial goals
Budgeting is a useful means of monitoring cash flow and seeing where your money goes, but it can also help you achieve financial goals. You can use your budget to identify areas where you’re overspending, highlight potential reductions and cuts and set targets for the month, quarter or year ahead. Perhaps you want to lower staffing costs or you’re keen to reduce debts, for example. Once you’ve established objectives, you can tailor your budget accordingly.
Make the most of software and online tools
There’s a lot to be said for traditional budgeting methods, but today, business owners have access to a broad spectrum of budgeting software and online tools. There’s nothing wrong with using pen and paper if that’s your preference, but it’s worth exploring budgeting apps and software that track transactions, organise outgoings by category and provide real-time, data-driven insights. If you’re not already using budgeting tools, you can research online and take inspiration from other companies. View case studies, read more about products, features and solutions and look for tailored programmes and apps that suit your business.
Online banking is one of the most revolutionary innovations for personal and business account management. Now, we have access to data instantly via phones and tablets. We can check balances, move money and monitor transactions from almost anywhere at any time. If you’re in charge of managing your business finances, it’s critical to take advantage of mobile banking to help you budget on the move. Check your account balances regularly, monitor your income and track spending.
Update your budget
Drawing up a weekly, monthly or quarterly budget can help you manage cash flow, reduce outgoings, maximise profits, achieve goals and set new targets, but it’s essential to update your budget. Things change. If you’ve had an influx of orders or an unexpected bill, you’ll need to adapt your budget. Review your budget regularly and try to ensure all the information is accurate and up-to-date. Use actual figures rather than estimates where possible. If you have to predict numbers, round up rather than down. Remember to include all your income sources and outgoings. Every time you budget, you should add any one-off expenses for the period in question to your regular outgoings.
Record all expenses
Being organised makes life much easier when budgeting for your business. One of the most important tasks to get right from day one is to record all expenses. Even small outgoings that seem insignificant should be documented, as they add up over time. If you don’t record all your expenses, this will make budgeting more difficult, increase the risk of overspending and cash flow problems and make filling in your tax return more challenging.
Budgeting is hugely beneficial for managing business finances effectively. If you own a company, it’s wise to implement simple steps to make budgeting easier. Examples include separating personal and business accounts, using purchase orders, setting financial goals and making the most of software and online tools. In addition, it’s important to update your budget regularly and record all your expenses.
