For most companies, money is the driving force that keeps the gears moving. Whether you’re a startup or a multinational franchise, having a budgeting and forecasting process flow strategizes your near-term and long-term financial goal.
Budgeting is such an important part of your operations. It ensures that your business stays within a reasonable level of expenditure without putting your company at risk of bankruptcy or losing the potential to expand (because even that costs money, too). To keep your expenses below the red line, take a look at these six tips on staying under budget every month.
Creating distinct budgets
Most businesses have more than one department or are planning to have extensions. In that case, why not create separate budgets? You can have different budgets for every department, or use other methods of division, such as teams, locations, shifts, or position—whichever works best for your setup. Either way, doing this will help keep your budget tracking more organized and decreases the chance of overspending by making it clearer how much goes to where.
It is also crucial that you separate your personal spending from your company expenses. As much as possible, try not to use your company credit card to spend for your family, as that will make budgeting for your company quite challenging and even confusing. Having two distinct bank accounts can save you a lot of time and effort in accounting—and also speaks well about your level of professionalism.
Making realistic forecasts
Budgets usually incorporate cash flow in their calculations. However, when these projections are wrong, budgeting becomes a chaotic affair, as you end up searching for money that was never there.
Using a balance sheet forecast mirrors your future income and assets. Through it, you can see the pitfalls you may encounter and address them to avoid hitting rough blocks ahead.
As a good rule of thumb, always choose the smallest amount in your projections. While not spending enough can easily be remedied, overspending will leave you scrambling to deal with your balance.
Assessing budget movements
Your business changes and evolves continuously, whether you’re conscious of it or not. You could have hired a new team, acquired a new client, or even moved to a different building. Whatever it may be, these changes may affect your budget and your priority in allocating funds. Assess your company’s current state and take note of how much has changed since you last updated your budget.
Leveraging budgeting tools
With many kinds of budgeting software available, you have a wide array of choices to track your finances. It will only take about 20 minutes of your week to find the best budgeting tool for you to understand your business’ financial status at a glance.
Need to set up this month’s budget? Whip up your chosen accounting software to have a better idea on the strategy that will lead you closer to your goals.
Thinking ahead and Prepare
Before rolling out your budget for the month, take a moment to step back and think: is there any possibility of an inopportune event that will throw your budget out of balance? Unexpected income is a pleasant surprise, but it’s the expenses that you need to worry about.
A huge chunk of your budget could be allocated for contingency, leaving you with a void that you desperately need to fill. Doing financial planning and forecasting allows you to look ahead and prepare for the unexpected with your budget.
Seeking expert help
Sometimes, you need multiple perspectives to come up with the best solution. Your team or employees can notice gaps in your processes which are important in patching up voids in your team. Having everyone on board also makes the process a lot quicker.
If you’re still feeling a little uneasy about your budget, then there’s no better place to look for wisdom than the experts. Many companies offer consultations and workshops to give advice to help other businesses thrive in today’s economy. With a simple phone call or email, you can learn from the expertise and insights of professionals.
Budgeting and forecasting process flow may be overwhelming as a startup, but with the right management and expertise, everything else becomes easier and manageable.
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This post was first published 17 January 2017 and edited 03 August 2020.