If you run a business, you are likely going to have budgeting difficulties to overcome. Today’s companies require a lot of investment to stay competitive in a global marketplace. Otherwise, you risk running out of cash or falling behind while you miss out on new opportunities.
While it would be great if you had unlimited funds, the reality is that you’ll have to keep certain areas in check, or you will go over budget.
It helps to review some common areas that could be causing budget issues so that you can either make those areas of your business more efficient or eliminate them.
So let’s look at some of the more common budget issues and what you can do about them:
One Time vs. Recurring Expenses
Nothing in business happens in a vacuum. There is always an element of time. This is especially true for costs. As a business leader or owner, you need to manage your expenses based on their duration and frequency.
For instance, having to purchase a business license would be considered a one-time expense. Therefore, you can easily plan around this single event. However, there are other expenses that are ongoing.
Those include utilities and office supplies, consulting, or legal services that you maintain. Take the monthly expense rate and multiply it over the year, or even longer. This way, you are always keeping in the big picture in mind when budgeting.
Irregular Cash Flow
One of the most significant budgeting issues that every company will run into is cash flow. For your business to stay afloat, you need to keep a constant eye on the cash flow statement.
In cash flow, what you are looking for are two things. First, you want consistency. The ability to predict how much extra cash you will have on hand is crucial to funding your payroll and other resources.
Secondly, you need to find ways to increase your cash flow in the long run. Ideally, you will have plenty of money left over each cycle to pay for all expenses and still have a surplus. This lets you put that extra cash aside in your “war chest.” You can reinvest this money back into the business, pay investors, or simply keep it on hand for emergencies.
When you look at your revenue over the past year, you will notice some trends. There will be certain months, weeks, or days that have dips. On the other hand, you might detect a spike in revenue during different periods.
Some businesses have fairly consistent income over the year, so dips are less frequent and of lesser magnitude. Still, depending on the profit margins you operate with, these dips could put you in a difficult position where you are unable to pay for business operations.
The best thing to do is to start tracking your income today. This way, you will build a historical track record of how seasonality affects your business revenue.
With a longer time frame and trend in mind, you can better prepare for these dips in advance. This might mean spending less during specific periods while you are weathering the storm.
Budgeting issues can arise from a number of areas in a business. They can come from your employees, your equipment, your lease for your physical location, taxes, research and development, and of course, your business processes.
By their very design, your business operations might be inefficient. They might entail hidden costs that you didn’t even know you were dealing with at first. Make it a point to review your business operations both from a high and a micro level.
What you are looking for are areas where you can improve the speed or usage of resources. For instance, you can automate business processes like responding to customer inquiries.
You can create email templates to answer common questions. That way, your team isn’t reinventing the wheel. Instead, they get more done in less time, helping out with the budget.
Poor Asset Management
The equipment you need for your business is essential to keeping operations running smoothly. But this equipment can quickly become expensive to purchase and maintain. In order to have the right equipment on hand without going over the budget, you need a smart strategy.
You have two choices: you can wing it, or you can use a guide that shows you the way. The first option could lead to mistakes, while the second will save you hassle and time.
Following a set of best practices for managing your business assets is a great way to ensure that you are looking at the right equipment to see what is necessary for operations and what you can phase out, replace, or sell.
This is the ideal approach, since most businesses don’t have an unlimited budget and don’t want too much equipment to maintain over time.
Employees are the lifeblood of any business. And they certainly don’t come free. To attract the right team to help you accomplish your vision, you will need to budget for certain expenses. And this includes more than just the payroll.
For instance, there is the training and onboarding process. The process requires another team member (or even multiple) to help new hires through these steps, which uses up additional resources.
You might also provide uniforms, tools, or other items necessary for them to perform their work. And don’t forget about insurance and benefits, which are “soft costs” that businesses often neglect to account for.
Budgeting is something that every business needs to do. However, the number of companies that actually do it, and do it right, are few and far between. And this is a big mistake. Each part of your business has some kind of expense that should be analyzed.
When you learn to look at your budgeting issues from a new angle, you can identify problems, get rid of the costs, or find ways to fund the asset or expense. That way, you will be able to move your company forward without sacrificing profit, motivation, or momentum in your marketplace.
Michelle Laurey works as a VA for small businesses. She loves talking business, and productivity, and share her experience with others. Outside her keyboard, she spends time with her Kindle library or binge-watching Billions. Her superpower? Vinyasa flow! Talk to her on Twitter @michelle_laurey.