Taking a long, hard look at your business finances isn’t always fun, but it’s one of the most important things you can do for the success of your company. Creating, using, and maintaining a strong budget is key in helping your business navigate lean times and make the most of windfalls.
1. Don’t Be Too Optimistic
As you begin laying the groundwork for your budget, it’s easy to get caught up in overly ambitious goals. Don’t write a budget that has no room for errors. For example, if you write a budget that assumes you can continue to pay your employees at your current rate for the foreseeable future, you’ll be unprepared when one of your most productive workers asks for a raise. If you assume that your business will sell every product that it produces or that every hour an employee works will be billable to a client, you may not be ready for product returns or employee errors. Be realistic about the factors that could cost you money or limit your profit.
2. Figure Out Your Risks
Every business faces risks. Perhaps your company is busiest in summer and hits a rough patch every fall, or a shutdown of the federal government could turn one of your income streams into a drip. Maybe your city is considering a significant increase in the minimum wage. No matter what risks could affect your bottom line, it’s important to take note of them and account for them in your budget. Consider how each risk could influence your business’ ability to function and how it could impact your income, then make allowances that would keep your business running smoothly in each scenario.
3. Make Saving a Priority
Everyone should have a healthy savings account, and so should your business. Automatically saving a percentage of income gives your business a buffer, giving you the breathing room you need to weather unexpected storms. Your savings can also help when you have to repair or replace equipment, bring on another employee as your business grows, or take a major risk to secure a new client.
4. Consider Each Expenditure In Your Budget
Once an expense makes its way into your budget, it’s easy to just keep paying for it every month. Cutting unnecessary expenses is a fairly simple way to boost your bottom line and free up money for equipment and tools that can help your business expand. Rather than creating a general budget that covers broad categories of expenses, get into the little details. Does your business really use that software, or is that subscription really necessary? If not, cancel it, add the money back into your budget, and move on.
5. Revisit Frequently and Revise As Needed
A budget is a living document. Setting a budget in stone is an almost-guaranteed way to make it futile in a matter of months. Set aside time in your schedule to review your budget every quarter. Use new data to figure out how realistic your budget is and make any necessary changes.
Are you ready to take your business to the next level this year? Make sure your legal bases are covered. Call Trembly Law Firm at (305) 431-5678 to discuss your company’s legal needs.
