Budgeting

BudgetingThe most common mistake that SME’s make is they fail to BUDGET.

You can regain control of your business spending, reduce your debt and start saving for future expansion. The answer is simply 3 words BUDGET, MEASURE & DISCIPLINE.

The reason why so many businesses find themselves victims of out of control debt, is because they are spending more than they earn.  This is further compounded by the fact that they have business loans, credit cards and overdraft facilities.  This puts them on a roller coaster ride that continues to spiral out of control and the debt and interest just keeps getting higher. 

Here Is How We Can Help You

  1. The first step to gaining back control is to set up a weekly/monthly BUDGET of income and expenses for the business.  We set up spending categories according to your needs as well as factoring in all minimum debt repayments as well as a safety buffer for any unexpected expenses. You are only allowed to spend as much as you have budgeted for and not a cent more.  
  2. We teach you how to monitor and MEASURE your spend and make any necessary adjustments for unexpected items that may occur in the week/month. The reason why so few businesses measure their spending is because it has been too hard and too time consuming up to now. It is easy, fast and automated using cloud technology. Using CASH is a NO, NO as this is too hard to track.  We recommend everything is paid for electronically through eftpos, electronic transfers, direct debits or bill payments as it is easy to track as items you pay on a regular basis can be automated into defined categories as the  items is recorded through your bank account.
  3. With consistent measuring of your actual income/expenses  versus your budget and tweaking of your spending,  you will quickly start seeing the results of a DISCIPLINED management program.

The REPORTING stage is the most terrifying part of the process, when you actually start seeing in dollar & cents value how much you are actually spending.

We also set up cost centres for those businesses that have multiple income streams. This allows us to become more specific in measuring and tracking approach to see where, how and on what the company finances is being spent.  This makes it easy to identify where cuts can be made.  

10 Tips for Staying on Budget

  1. Be flexible – life is unpredictable and things happen that are out of your control. If you allow some extra money for variable expenses you will never get caught with too little resources.
  2. Special Bank Accounts – Set up a call account to transfer all reserves you have into. The banks pay higher interest if you do not touch your money and there are penalties if you do.
  3. Constantly analyze your spending, always be on the look out for ways you can cut costs or source cheaper options.
  4. Always make sure your bank account transactions are reconciled daily as this will help you avoid spending money that is already accounted for. Traditionally business owners have worked on a catch up cycle being given out of date information from their bookkeeper or accountant. Adopt a proactive approach instead of a reactive one.
  5. Keep all your receipts. This is the best way to see what you have spent the money on. Take a picture of the receipt so it is able to be transferred to your accounting system electronically without the need to waste your valuable time data capturing it and having to pay someone to file it. Adopt a paperless environment using technology.
  6. Pay Debt Down – get rid of your debt as fast as you can. The quicker you pay off the debt the more you save in interest costs.
  7. Share the responsibility – make sure that everyone in the company has the same cost saving ethos and clearly communicate this to your staff. Reward them when they achieve cost savings, this will inspire them to go that step further.
  8. Cut bad habits – small adjustments to how you used to do things and how you should be doing it going forward will ensure the success of the culture in cost saving and being able to develop a sustainable business practices.
  9. Use only funds that you have budgeted for. It is very easy to spend on credit cards and overdrafts but they come at a huge cost to your bottom line.
  10. Focus on savings – the temptation is always there to spend money you have saved on acquiring more equipment, etc. but hold of on making those decision for as long as you can and only acquire the new equipment if it is vital to enhance efficiency and productivity. Always ask one or more of the questions: