Getting A Grip On Financial Budgeting

Being a small business entrepreneur, two of the most important things I put an emphasis on are cash flow and financial targets. In your start-up stage (the first 2 years of business) you will more than likely be focused on increasing revenue and minimizing costs. However as you hit the growth stage you will find your revenue is high but also your expenses and material costs have jumped. In this post I will talk more about how to budget with planning tips that I have learned from my mistakes.

The biggest problem you will have when you are small is that you will not have enough people in your business. In my business when we started there was only my partner and I. I was put in charge of sales, accounts and budgeting. The mistake I am starting realize are the person who is in charge of sales cannot also be in charge of forecasting and budget review. Their job is stressful with a lot of work. The workload on top of budget planning and reporting can make your view biased.

Therefore someone not involved in the sales process should check over all financial reports and match this up to the organisations financial budgets. This person is a third party to the sales process. At the end of every month they are also not worrying about starting their next month with a bang with revenue. A person in sales core job is to worry about hitting their financial targets. The great thing about this is it does not need to be someone with an accounting brain, it only needs to be someone with common sense who is not actively involved with the sales side of things.

The things I would be looking at as my core job was sales would be solely on revenue. However someone focused on just budgeting will look at everything. Besides revenue they will look more closely at the cost of goods sold and expenses every month. As your business shifts from the start-up to the growth stage what you will find is that there are a lot of holes in the costs to your business. It can be easy to find ways to plug these holes and shave anywhere between 10-20% of your expenses and material costs from month to month. Some ways you can do this when you are large enough are asking simple questions such as:

Can we buy our stock in bulk for a discounted rate?

Can we shift to a different freight company with cheaper rates as we are shipping out more goods then when we started?

Can we batch services together with one company for a lower rate?

Do we really need certain expenses?

Getting a grip on your budget planning is stressful but is not as complicated as it sounds. You need more than 1 person involved to do this reduce the risk of a biased view in all budgeting. It is also important to note that financial budgeting should be checked over at the very least monthly to ensure you are on target and that there are no nasty shocks awaiting you at the end of the financial year.