Budgeting season is upon us, and anything that deals with managing finances can be especially stressful. As with any immense task, getting back to the basics is a great way to deconstruct a tedious undertaking like budgeting. To ensure you are prepared for a financial planning session that won’t take the wind out of your team, we’ve put together our top tips for stress-free budgeting:
1. Check industry standards
Every industry is different. Do your due diligence to check how much of your revenue will likely be allocated to cost groupings. To find this information, utilize the IRS website, your local library, and tap other local business owners for their insights. The important takeaway is to gain a good understanding of industry averages, so don’t worry about being absolutely precise with these particular numbers.
2. Find areas to cut costs
Once you have your budgeting spreadsheet in place, the next step is to find areas where you can cut down on expenses. Start with fixed expenses – like rent and insurance. Determine costs that can be changed in the short run – such as non-critical maintenance, discretionary purchases, adjustments to labor usage, etc. An alternate money-saving tip is to wait to make major purchases until the start of a new billing cycle to make sure those costs are fully funded upfront. Do whatever works best for you and gives you the breathing room you need.
3. Take time to look around
Take inventory of your current suppliers and service providers to determine which are necessary to keep, and which you should probably look into replacing. Is your third-party partner contributing to your business in a valuable way you can’t achieve by yourself? While this can really be done any time of the year, taking the time to do so during budget planning is particularly beneficial. Make sure to shop around for comparisons as widely as needed to make sure your third-party partnerships are worth the money you’re putting into them.
4. Plan to review your budget often
Stress less during the fiscal year itself by setting incremental check-ins to review the annual budget as a team. This should be done at least every month for small and medium-sized businesses (SMB), since unexpected expenses have the potential to throw the budget plan off track. With more frequent reviews, you can address issues that affect the annual budget with a better strategy in mind.
5. Leave some slack
Think of your budget as a fluid plan – don’t aim for precision down to the penny or you’ll drive yourself crazy. The future is often uncertain and things are bound to come up that are out of your control. With this in mind, make sure to under-estimate revenues and revenue growth to allow room for some unexpected expenses that are bound to pop up.
Budgeting isn’t the most glamorous aspect of running a business, and you may even view it as evil, albeit a necessary evil. With the proper steps in place, your team will be up and running with a top-notch budget for 2018 in no time. Remember, breaking budgeting down into simple, achievable steps is the best way to stress less this time of year.
Do you have some budgeting tips you’d like to share? Tweet us with your thoughts!
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