Just as a small child needs a playground fence to keep them safe and happy, your small business needs a budget so that you can be financially safe.
Once you have set a budget, here are a few things to consider when implementing it in your business:
Follow Through
Keep an eye on your budget. Compare it regularly with your actual figures, be it sales or expenses. This way, you can get an idea as to how close your projected and actual figures are. You might go off track in some of your estimates, but as long as you manage to stay near your projected figures, that should be good enough.
Experience will make your future budgets more in tune with your actual figures.
Keep an Open Mind
Be flexible when following your budget. Be prepared to lower your expenses if your income doesn't match up with your budget. This might not be easy, but in a small business, you may not have any other way out. You can defer your expenses to a later month if your current month is not going well.
Keep a sharp eye on your cash flow. Staying in the black will keep your business out of financial trouble.
Budget for the Worst, Work for the Best
Develop your budget so that you show slightly higher expenses and slightly lower income. That way, if your expenses are low and sales are good, you can safely stay within the guidelines of your budget. However, it is important to always have a backup plan ready as far as cash is concerned.
Most small businesses fail because they do not have spare cash to bail them out when they get into trouble. Save up your money during the first years of your business, just in case something unexpected happens that is beyond your control.
So, whatever line of business you are in, you should set up a budget first, and then follow it regularly so that you can operate safely inside your financial playground.
