Budgeting is one of the most important aspects of running a small business. Without a budget, it’s easy to overspend and find yourself in financial trouble. Trying to run any business, even a small start-up without a well-planned and realistic budget is extremely risky.
In this blog post, we will discuss some of the most common budgeting mistakes small business owners make, and how to avoid them. By following these tips, you can keep your business finances on track and improve your bottom line!
Why do I need a business budget?
Creating and sticking to a budget is one of the most important things you can do for your small business. A budget will help you keep track of your expenses, and make sure that you’re not overspending on items that are not necessary.
It also allows you to plan for future expenses or emergencies, which can help you avoid any financial surprises down the road.
Mistake 1: Not having a budget!
The first and most important step in creating a successful budget is actually to create one! Too many small businesses operate without a budget, which can lead to overspending and financial issues later on. If you don’t have a budget, now is the time to create one. Ensure your budget is realistic and captures all facets of your business.
Mistake 2: Failing to track expenses
Once you have a budget in place, it’s important to track your expenses and make sure that you’re sticking to them. This can be done by keeping receipts and recording your expenses in a spreadsheet or software 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 and at the end of each month, 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 crucial to every business however can be one of the top problems business owners have. It is important when creating a budget to know when money comes into the business, not just how much.
When it comes to merchant fees, Smartpay helps our merchant’s cash flow with our Zero Cost EFTPOS solution taking these fees out daily and settling the full transaction amount the next business day. With no bill at the end of month, this means no more reconciliation equalling more savings and time put back into the business!
Mistake 4: Not planning for future expenses or emergencies
Another common mistake is failing to plan 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 can ensure that you have the money saved to cover them so you don’t end up overspending at a time where you may need the cash flow.
Mistake 5: Not adjusting your budget as needed
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. The key is to be flexible and make adjustments as needed so that your budget remains relevant and realistic.
Mistake 6: Not factoring in tax liabilities
One of the biggest mistakes small businesses make is not factoring in their tax liabilities when creating their budgets which can lead to issues at the end of the Financial Year when it’s time to pay taxes. To avoid this, be sure to consult with a business tax professional so that you can accurately estimate your tax liability and factor it into your budget and planning.
Keeping your business on track
Budgeting is such an important part of running a successful small business. By avoiding common mistakes, you can set your business up for success. Be sure to review your budget regularly and make adjustments as needed so that it remains relevant and always plan for emergencies and your tax liabilities.