Don’t Make These Mistakes: Budgeting For Small Business

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A small business without a budget? That’s a recipe for disaster. Budgeting for a small business is critical to avoid overspending and financial trouble. But if that budget isn’t well-planned and realistic, you’re heading into risky territory.

We share common small business budgeting mistakes and how to avoid them. Then you’ll be on the right path to get your finances – and your bottom line – in good shape.

Mistake 1: Failing To Budget At All

You might be surprised at how many small business owners fall into this trap. No matter the size of the business, or how long it’s been operating, you do need a budget.

Without a budget, you’re effectively running your business in the dark. If you don’t have one, make it a priority to create one, ensuring that it’s a true reflection of your business.

Mistake 2: Avoiding Expense Tracking

Don’t create a budget and then stick it in a drawer. Unless you’re tracking your expenses, you can’t know how you’re performing against your budget.

This can be a fairly straightforward process of keeping receipts and recording your expenses in a spreadsheet or expense management program. Modern expense tracking software can even track your expenses automatically, making it easy to stay on top of your spending.

Track expenses from your business account for operational costs, utilities, production, overheads and other costs. Then you can see where you can cut back or save money and compare your expenses to your budget to ensure you’re still on track.

Mistake 3: Ignoring cash flow

Cash flow is one of the biggest issues small business owners can face. It’s great when money is coming in. It’s not so great when it’s not. Understanding your business cash flow is crucial when budgeting for a small business. You need to know when money comes into the business and out, not just how much.

With Smartpay Zero Cost™ EFTPOS, managing cash flow for your payments is easy. We take merchant fees out on the fly (meaning at the time of the transaction) via a small surcharge and settle the full sale amount the next business day. No bill at the end of the month. No more reconciliation. Just savings in your pocket.

Mistake 4: Planning For Today And Not Tomorrow

You never know what’s around the corner. And your budget should account for that with room for future or emergency expenses. This can include things like upcoming repairs or renovations, new equipment purchases or even seasonal fluctuations in business.

By planning for these expenses, you avoid the panic when they inevitably arise. You’ll protect your cash flow and sleep easy knowing you’ll have the money when you need it.

Mistake 5: Taking A Set And Forget Approach

As your business changes and grows, so should your budget. If your sales increase, you may need to adjust your spending accordingly. Likewise, if you experience a decrease in sales, you’ll need to make corresponding cuts.

Budgets aren’t set and forget. You need to be flexible and make adjustments as needed so that your budget remains relevant and realistic.

Mistake 6: Forgetting Tax Liabilities

Don’t forget about your tax liabilities when you create your budget. Otherwise, you can find yourself facing a hefty tax bill at the end of the financial year, with no cash available to pay it.

To avoid this, be sure to consult with a business tax professional so you can accurately estimate your tax liability to factor into your budget.