Getting Back on Budget

Sep 6, 2022
Getting Back on Budget

A good, working budget is one of the most important tools for starting a business that can thrive financially, but accurate budgeting takes more time and research than a lot of people expect. A budget that does not estimate and forecast accurately will create costly problems down the road and can bring an abrupt end to an entrepreneur’s dream of owning and running a business. Some typical things starting entrepreneurs must take into account when creating a business budget:

· Start-up costs

A new business will need equipment, supplies, furniture, inventory, permits, licenses, and technology in order to get started.

· Operating costs

New businesses will have recurring costs that allow the business to run, including lease payments, utilities, advertising, marketing, accounting services, and payroll.

A good budget is one that is as specific as possible; a good budget also slightly overestimates the costs of these things in order to create a financial cushion, and it incorporates and emergency fund so that an unforeseen expense does not throw the business into chaos. Still, no matter how much research you do upfront, budgets can go off track. Your budget is only as useful as your discipline to stick to it. Some common reasons business owners go off budget:

· Sales are lower than expected

· A large, unexpected expense requires immediate attention

· Expenses are not tracked

· Accounts are not reconciled consistently

· The budget is not realistic or well-researched

· Marketing and customer acquisition costs are inaccurate

· Shipping costs are rising faster than anticipated

Creating a realistic budget—and then sticking to it—are vital, but just because the budget was thrown off for one or more of the reasons above does not mean all hope is lost. If you’re finding your budget falling short of realistic standards to running a business in your industry and region, some ideas to get moving in the right direction:

1. Stop spending

Putting a complete freeze on spending is probably not possible, but stopping as much non-essential spending as you can—at least temporarily—is necessary to stop the financial bleeding. To get your budget corrected, you will need to assess where it went wrong in the first place, and while you do that you don’t want more money going needlessly out the door, so putting a temporary hold on all new spending can buy you some time to figure out where you went wrong.

2. Cut costs

While analyzing how your revenue and/or expenses failed to match up to their expectations, you will need to consider lowering the costs that you can control. Leasing a smaller or less expensive space may be one option. Shopping around vendor costs and insurance products may offer some savings possibilities, as will reassessing office supply costs and marketing costs to find less expensive alternatives to what you’re currently using. Automating your administrative and financial tools can also save money.

3. Create a new budget

After you’ve assessed the areas in which your budget fell short, create a new one. If you had an unexpected expense that threw you off, build into your new budget a small emergency fund that you can tap the next time this happens. If you underestimated marketing costs, look for less expensive options that harness social media and online tools that are inexpensive (or free) and can be accessed universally. Commit to tracking each expense carefully and to reconciling your bank statements and credit card statements each month, while also staying on top of paid and unpaid invoices.

4. Incorporate automating bookkeeping

Cloud-based accounting and payroll services are available to businesses of all sizes and make budgeting easier than it has ever been. They track and categorize expenses automatically, sync with your bank accounts, provide an instant, up-to-date snapshot of your financial situation, and can be accessed from anywhere you have an internet connection. They can also automate payroll, calculate deductions, pay employees, and help you file your payroll taxes. Low-cost services that integrate with each other are cost-effective alternatives to hiring bookkeepers and payroll managers while still helping you stay on track financially. Online check printing and mailing services are a smart add-on that allow you to issue immediate payments right from your computer.

The sooner you begin assessing and readjusting a failed budget, the better. Building as much flexibility into a new budget, and firmly committing to your own financial discipline, will help you learn from the process and plan better for the future.