How to Maintain an Effective Budget
Posted on 17th June 2022 at 10:00
Staying in control of cash flow can be difficult, which is why having an effective budget in place is so important. Whether you’re a sole trader, the director of a large company or anything in between, we’ve put together some top tips that will help you to place budgeting firmly at the centre of your financial strategy.
List your fixed monthly costs
Your business will also have expenses that change throughout the year or arise only occasionally. These also need to be factored in, as they could affect your annual cash flow almost as much as your main costs.
How much are you likely to earn?
Once you have all of your costs listed, it’s time to look at the bright side and log down your predicted revenue. This includes any projected sales, such as orders or jobs that are in the pipeline and likely to go ahead. However, it’s savvy to arrive at two figures: a best-case scenario and a worst-case scenario, as this will allow you to create a more accurate forecast of upcoming cash flow.
Track your profit or loss
Even in the worse-case scenario, your revenue will hopefully be higher than your costs. If this isn’t the case, it’s crucial that your expenses are reduced in order to ensure that there’s more money coming in than going out. There will almost certainly be areas of the business that can be run more efficiently from a financial perspective, which could involve finding a better deal with an alternative supplier or cutting out a nonessential outgoing entirely.
Enhance your sales strategy
Even if your financial forecast is looking strong, it’s essential that you futureproof your business by exploring new ways to ramp up sales. This can take many forms, such as increased or renewed marketing activity, joining networking groups, asking existing customers for online reviews, or perhaps even taking on new staff or apprentices if your budget allows.
Set up an emergency fund
It’s always a good idea to have some emergency funds available, as this will give you some breathing room during slower periods. It also means that if something unexpected occurs, such as machinery breaking down or new software being required, you have some money put aside to cover it. Even if you never need to dip into this emergency fund, the peace of mind it creates is an investment in itself.
Plan regular budget reviews
We provide a Monthly Management Accounts service that our clients find extremely useful. These reports explain everything you need to know to stay on track of your numbers. Also, by having monthly/quarterly catchups either in person, over the phone or via video call, we’ll help you to stay in control of your budget and explain where improvement is required. As a result, you’ll never have to worry about nasty surprises rearing their ugly heads, as you’ll always know where you stand.
Ask us about Management Accounts
If you’re interested in Management Accounts and monthly management meetings, call our Northern office on 01482 235575, our London office on 0207 885 0605 or fill in the contact form below.
Tagged as: Budgeting and forecasting
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