As a young guy making his way in the leanest economy of recent times, my concept of budgeting has basically involved saving as much money as possible. It has meant buying the economy-sized boxes of cornflakes, raiding the TESCO budget shelf for still-good fruit and veg, and feeling pangs of guilt for not doing the weekly shop at the distant LIDL outlet.
Doing my research for this blog I came across a very interesting point – that budgeting is not about saving money, but rather about not wasting it. Naturally every business has to initially invest money before it can make a profit, and so budgeting is important even when you’re in the red. This blog will sum up a little of what I’ve learnt, with some shameless plugs for budgeting software that will make this essential but sometimes painful process easier.
It would be an unfortunate mistake to consider your budget a straightjacket that limits your success. Rather it is a tool that keeps your business on track, helping you achieve your desired outcomes.
Every business venture requires research and preparation; determining what makes your product different, understanding whom to sell that different product to, and building the nerves needed to jump into the entrepreneurial abyss. Even the best-planned business is going to fail if the money isn’t managed. For businesses that are just starting up, there are three processes that need to be implemented, to ensure a return is generated as soon as possible.
Making your business plan – It’s a no-brainer, but a well-structured business plan is essential to success, as a means of determining how your money can be utilized to the best possible effect. Your business plan should include:
Annual Budgeting – This determines the fixed and variable expenses of the coming year, and what your budget outcomes may be. A good budget is essential for ensuring companies have long-term success. Failure to manage an appropriate budget can lead to businesses failing even before they get off the ground. A budget is not a record of the money that has been spent, but it is plan for how money will be spent, and as a plan it is only as good as its creator’s dedication to sticking to it. It needs to include:
Forecasting – This is an on-going process which helps predict an organisation’s earning and spending. Forecasting is a process which must be undertaken over the full length of the business plan’s implementation, and should take into account potential risks and opportunities.
The android accountant
There is plenty of success to be had in small business, especially if software is being smartly in order to eliminate the need to rely on expensive contractors. Good budgeting software will help do two jobs – streamlining what is otherwise often a long, tedious and strenuous process. The software helps minimise mistakes in manually-developed budgets (for instance, those created in Excel), while it can also take advantage of effective financial trend predictions.
The question of what budgeting software to use is a complex one – there are abundant products that can help maintain a small business’s budget. Looking through the options has indicated that in terms of choosing one programme over another, businesses should look for ease of use. Many products will work well in partnership with others, which are designed to streamline how your business operates (Slack for team management, for instance, or BookingLive for collaborating with customers).
That said, here are some of the more popular budgeting applications. I would recommend trying each of them out, and seeing how they could fit into your business framework.
Tip of the iceberg
This content is a basic overview of what is a very complex topic. What are your thoughts about how budgeting should work? What suggestions haven’t I made, that you would have included? Please share your thoughts with us!