In your business, there are few things more important than an accurate and highly focused budget. While a budget might not seem like a very exciting aspect of running a company, it’s crucial to ensuring that you know where to spend your cash when it starts coming in. The right budget will protect you from wasting the money you so desperately need to keep the lights on for your venture.
What’s more, if you’re just getting started in the business world, a budget is also a crucial part of convincing banks to hand over loans, or letting investors know that they can trust you to give them a return on their cash. So, what do you do if you’ve been working on a basic budget for a while, but realize now that it’s time to upgrade your spending strategy?
Here are 5 ways to build a better business budget.
Start with a fresh slate
Usually, it’s a good idea to start with a clean slate when you want to upgrade your business budget. Rather than just adding and subtracting items to an existing plan that might already be problematic, start from the beginning and ask yourself what kind of fixed and variable expenses you really need. Using a clean slate will take you out of your comfort zone and force you to justify every expense in your plan. If you decide that one of your costs is unnecessary, you’ll also find an opportunity to save money.
Remember, the key to success is making sure that every expense on your list has a profit-driven purpose. Ask yourself how each item you’re paying for is helping to bring more money back to your company in the long-term?
Consider your vendors
Most businesses need to work with vendors, but there’s a chance that the suppliers you’re dealing with aren’t giving you the best deal. Start by finding out which vendors are crucial to your operations and eliminate anything you don’t necessarily need. Once you’ve found your critical vendors, ask yourself whether you can get a better deal elsewhere. Just as consumers can compare the costs of things like utility bills and car insurance with different companies, you can take the same approach to your suppliers.
If you’ve got a good relationship with one of your suppliers, find out whether they would be willing to lock in the price of your current investments, or offer a discount if you decide to spend more.
Rethink your subscriptions
In the consumer world, subscriptions are a common problem for budgeting. However, even businesses can end up having issues with their subscriptions if they sign up for trials with services and software and forget to cancel those trials later. The best way to make sure that you’re not paying for anything that you don’t need, or that you don’t use is to check out your bank statements from your business account and highlight anything that you’re spending that you aren’t sure about.
If you have subscriptions that you’re aware of in your list, then you can always find out whether you can get a better deal by switching to a different service provider.
Analyze your employees
Your employees are one of your most important assets as a business leader. However, it’s crucial to ensure that you’re getting the most possible value out of your payroll budget. If you have employees that are working in an expensive office building that would be able to get the same amount of work done from the comfort of their own home, consider trying a remote working strategy for a while.
You could even consider outsourcing some of your more specialist tasks to freelancers when you need extra help, so you don’t need to pay for a full-time staff member every time you encounter a specific problem that you need to overcome.
Evaluate your margins
Finally, sometimes to get the most out of your business budget, you need to be willing to sit down and examine the numbers. When’s the last time you examined your gross margin for each client? If 20% of your sales are going to a 5% margin and 70% are going to a 30% margin, it might be worth focusing more of your time on the customers that are giving you the most return on your investments.
If the idea of having to figure out your cash flow and margins by yourself fills you with panic, then you could always consider working with an expert or financial professional for additional guidance.