One of the most challenging parts of starting a small business is keeping on top of your finances. But budgeting is key to long-term success and a habit that’s best practised early on in your journey. If you’re struggling to keep your money in order, these budgeting tips could help you get off on the right foot.
Use Accounting Software
Whether you’re filing your tax return or organising your VAT online, accounting software can help you to keep track of your finances. Efficient and accurate, you’ll benefit from automatic calculations and an easy-to-use interface. You’ll be less likely to make mistakes and won’t have to put in so many hours crunching numbers. If you’re still scrambling for spreadsheets and invoices, then you’re really missing a trick by not making accounting software a priority for your small business.
Know your Cash Flow
Not being aware of your income and outgoings is a recipe for disaster. It’s easy to think you have client payments due at the end of the month and then realise the project won’t be finished for an extra few weeks. This can eventually send you spiralling into debt as you take out loans to tide you over until the money comes in. Understanding your cash flow will help you to feel more secure in your finances, allowing you to make wiser investment decisions.
Take Things Slow
Almost all entrepreneurs are in a hurry to grow their businesses, especially when things seem to be going smoothly at the beginning. But investing in the best and the biggest assets could land you in some hot water if your finances aren’t quite ready for these commitments. You’re better off pacing yourself and accepting a slower pace of growth than jumping in headfirst with things you can’t afford.
While that super-fast website or shiny new app might look attractive, consider whether you really need them based on the demand you’re experiencing. Often small businesses won’t need to invest in certain products and services until their customer base has grown significantly.
While it’s good to be cautious about your spending, careful investing is a must when it comes to keeping your business’s budget healthy. Putting your money back into your business helps you to grow and increase your revenue. This might mean outsourcing your marketing to an agency or renting a new studio that helps you work more efficiently. But don’t mistake investing for reckless spending. Your investments should always be in aid of development and contribute in some way to the products and services you’re offering.
Forecast Future Sales and Costs
Understanding your cash flow is useful, but being able to predict how your financial situation will change in the future is even more valuable. This might take some time to get right, but after a while, you may be able to predict when sales are set to increase. You may notice weekends or holidays are your busiest time, allowing you to prepare accordingly. Similarly, if you know you’re running out of raw materials, it’s important to factor in these upcoming costs so you don’t overspend.