5 Business Budgeting Secrets! Things to consider when planning your budget

Budgeting is at the heart of almost every business plan. “How much will I make and how much will it cost and how do I achieve this?” Here are some tips to help you with your budgeting.

• Budgets should first and foremost be realistic. A budget which leads you to your desired profit level in two years time may be appealing, but an unrealistic plan is not an asset. Your strategy should therefore be based on real life experiences and genuine market analysis.
• Another essential element is that you should frequently monitor your actual results against budget and update and refine your budget as required. Maintaining an up to date budget can help identify monthly goals which can feel more obtainable than a daunting annual figure.
• Budgets must never stop the development of the business. If an opportunity is to appear the answer should never be “but I didn’t budget for it”. A vibrant economy is one that develops and changes, and accordingly your plans must too. The question should be “is this a worthwhile use of resources?” not “did I anticipate this cost?”.
• Look to cut unnecessary costs. If every business owner took the time to sit and look at exactly what their costs were they would probably find a few areas where they could be reduced. By scrutinising the figures you can see which costs have increased and then question why and if it’s reasonable.
• Don’t forget the cash flow aspect of your budget. You need to ensure that your business will have enough cash day to day to pay the bills. There is no point in spending time setting a budget if the business does not generate enough cash to survive at any stage.

Complex and intricate budgets are useless if they do not give you a realistic view of how the business is doing. It is essential to make sure that the business has enough cash flow and generates enough profit to operate, grow and have a security blanket in the event of the unexpected.

At Johnston Smillie we support and guide clients through business budgeting. If you would like to discuss any aspect of this please contact Angie Harvey on 0131 317 7377 or angie.harvey@jsca.co.uk and she will ensure you are connected with the most relevant and available member of the team.