Earlier this month we considered it our moral obligation to advise you how to design the most effective business card. This came about after watching 90s classic, American Psycho where sociopath, Patrick Bateman goes on a killing spree after becoming uncontrollably jealous of his colleague’s new card. This time we’ve been inspired by the Wolf of Wall Street himself, Jordan Belfort, to outline to you the paramount importance of small business budgeting.
Whether you’re the CEO of a multi-million pound enterprise like Stratton Oakmont or the one-man-band now starting up your own small business venture, budgeting is utterly none negotiable. Up to date financial records are as instrumental in the success of any small-scale start up as they are for huge, great big, international firms.
A calculated and well-researched budget provides the framework for every good business model so it’s time to get yours in check!
Budgeting is a very personal thing so it’s really down to you to choose the most effective method for you. Whether you opt for a tech-savvy accounting software, trusty computer spreadsheet programme or even good old pen and paper, each method will provide you with an effective gauge of your business’ performance.
Budgets enable you to keep a clear record of fixed expenses (rent, loan payments, wages), variable expenses (utilities, supplies) and one off costs (business lunch with somebody you’re trying to impress).
So if you feel like a headless chicken with a great idea, running around trying to get your small business off the ground, then stop right there. Put your feet up for five minutes and let us show you why you need to invest more time and energy into your budgeting process.
We can’t promise it will score you a date with Margot Robbie or a yacht on a New York harbour but we can promise it will keep Mr. Tax Man off your back at the end of every month.
Cash flow control and cost cutting
Keeping track of your historic records and figures will enable you to establish where you can afford to be lenient with spending and where you are going to need to tighten those purse strings. In the film, Jordan’s father is aghast at a $26,000 restaurant bill which his hedonistic son cheekily justifies with expensive champagne and “cancer curing sides”. Unless you can really afford it, this type of extravagant spending is only going to end badly but regular budgets can help you learn and accept your own limits. You want to cash in, not max out.
Accuracy and self-evaluation
Budgets are an extremely effective tool that, like roadmaps, can show you where you need to be and exactly how to get there as well as letting you know when you’re on the wrong path. Establishing the reason behind the difference between expected budget figures and actual figures is a crucial part of the process that will enable you to eliminate weaknesses and capitalise on strengths.
Make sure you’re honest and realistic with yourself when drawing up a budget and analysing your actual figures as failing to do so will only leave you having to justify books that don’t add up. Setting unrealistic goals will also leave you downhearted and frustrated so ensure your targets are within reach before setting them.
Having a clear budget in place allows you to effectively plan ahead, prioritise financially and implement any necessary changes needed to improve your outgoings and increase your income. Forward planning means you are able to identify effective cost-saving methods and maybe even contribute to savings that could act as a safety net should financial crisis ever arise.
It’s important to remain open to change when creating your budgets as you will need to factor in for things like fluctuating demand, market evolution, and new competition. Where you invest your cast may alter from month to month as you discover additional need for marketing and promotion or unforeseen obstacles along the way.
Leave it to the professionals
Often budgets have to be pretty tight and unforgiving when it comes to small businesses but allocating some cash for a great accountant might be one of the best decisions you ever make. Accountancy services can be overpriced and frustrating but our affordable online service is here to break the mould.
From sole traders and freelancers to limited companies, our team of experts don’t limit how or when they work for you. No office on Wall Street? No problem! Offering an online service means we’re always on hand to ensure your budgets are bang up to date and super-efficient whether it’s over the phone, via video conference or through email.
If you would like to find out more or get a no-obligation instant quote, simply click here and we’ll be in touch!
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About The Author
We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!