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10 Ways Small Businesses Can Streamline Their Budget

by BBB Staff | Jul 26, 2018 12:42:46 PM

If you're like most small business owners, you've experienced what it is like to operate on a bootstrapped budget. New businesses are notorious for the smallest of profit margins, and success in starting and growing a small business can be a financial balancing act.

If this describes you, you're likely always open to new advice regarding ways to streamline your budget and better manage your finances. Here are 10 small business finance tips for ongoing success:

1. Be Proactive with Your Bookkeeping

Because of the number of hats you have to wear as a small business owner, it's understandable when one of your many priorities is forgotten about and put on the backburner.

Bookkeeping is one of the most common responsibilities to set aside, which can cause problems. When you don't have a grasp on your finances, you can't get a clear picture of your budget, plus you end up spending money on tax penalties and late payments. If you can't manage your business accounting on your own, hire someone you can, invest in bookkeeping software or go to a CPA or business accountant for help. You may think you can't afford it, but the financial hit is worth avoiding bigger problems in the long run.

2. Don't Overcomplicate Things

Sometimes you may feel like you can build your own small business solutions. After all, you built a business. How hard can it be to manage your marketing, accounting, HR, etc.? The fact is, it's almost always easier and more cost-effective to use apps and software built for businesses like yours then to design solutions yourself. Here are some examples of tools tailor-made to help small businesses.

3. Forecast Your Cash Flow Over the Year

Most small businesses are cyclical. If you're in retail, certain holidays will be best for business. If you're in, say, tax accounting, you're busy season will be during February, March, and April. It's important not to forget that when your business is doing well, it will also have some down times. When you're building your yearly budget, take into account that your margins will be different during different points of the year.

4. Make Sure Your Marketing is Cost Effective

Some types of marketing have a higher return on investment (ROI) than others for different industries. Find marketing channels that pay for themselves, rather than wasting money using disjointed marketing strategies. For example, paid search (Google AdWords) and email marketing are the marketing strategies with the highest ROI, according to studies.

5. Revise Your Budget Regularly

The costs that your business accrues aren't static and neither are your income sources. You might have to hire more employees over the course of the year to respond to a growth in your market share, or your sales cycle may shift. If you're not responding to changes by revising your budget and forecasting accordingly, you won't be prepared for financial changes.

6. Understand Your Risks

Like all businesses, yours has long- and short-term risks. Workplace injury, theft, and natural disasters are just a few that your business may face, and it's important to assess these risks, mitigate them however possible, but most importantly, understand that they are there. If you allow risks to catch you off guard, it will be damaging to your finances more than if you confront them and build a contingency plan in the event that they become actualities.

Here's a breakdown of how to build a small business contingency plan in the face of a variety of risks.

7. Separate Your Personal and Business Finance

It can be tempting to look at your business as an extension of you, but this can overcomplicate the process of managing your finances. It's important to treat your business as a distinctly separate entity from yourself. Separate your bank accounts. Pay yourself a paycheck that's separate from the money you set aside to cover unexpected costs for your business. Keep track of the times you use personal items for business purposes and vice versa. In the long run, this will make it easier to balance your business finances and your personal finances.

8. Look for Contingency Cuts

"Contingency cuts" are line items that you can cut from your budget for a limited time in a financial emergency. For example, your team can agree to defer paychecks until your business is in a better financial situation, or you can scale back marketing campaigns until you can afford them again. This isn't ideal, but it can be a way to stay in business during your lowest points.

9. Don't Spend Prematurely

The goal of your business should be growth. This can be a double-edged sword, however, as business owners often fall prey to something called "premature scaling." This means that you should be cutting costs and saving money, even when it seems like your margins (and your business) are growing.

10. Don't Be Afraid to Ask For Help

Whether it's for a discount from a vendor or simply for tips from a trusted advisor, asking for help should always be an option, especially when you're feeling overwhelmed by a tight budget or negative turn of events. Don't let your pride be the reason your small business fails.

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