Yes, the B word. Undoubtedly one of the least-glamorous or enjoyable aspects of running a business. And because budgeting is, dare I say, boring, many entrepreneurs end up procrastinating balancing the books, or doing the bare minimum which often entails vague projections of what they think their income and expenditure look like. Needless to say, neither of these approaches end well. Ever. The truth is, everyone struggles with budgeting to some extent, (and if they say they don’t, there’s a good chance they’re lying). While you’re (probably) never going to relish the opportunity to crunch the numbers, you will find that budgeting is like riding a bicycle: it requires practice, courage (to face the bare facts of your cash flow), and a willingness to learn. These tips will help you to get there:
Your budget isn’t the enemy
I don’t know about you, but back in the day when I was wet behind the ears and without a clue as to how to manage my money, when I heard the word “budget” I automatically crossed my arms, shook my head, and blocked my ears. The thing is, what I didn’t know back then was that a budget is actually there to help you. It’s there to make sure that you and your business have the best chance of succeeding, by ensuring that your money is working for you.
A budget doesn’t have to be completely accurate to work in your favour
Unless you’re gifted with the ability to predict the future, your budget will never be completely accurate – and that’s ok. In fact, that’s pretty standard. While it’s easy to take fixed expenses like rent, supplies, salaries, etc. into account, it’s impossible to put a number to variable costs like transaction fees, water and electricity, packaging, etc. In other words, your budget is an educated guess that serves as a map. At some point, you’ll need to tweak it according to actual figures, but by estimating your expenses and then matching your revenue to it.
Plan for bumps in the road
I’m not talking end-of-the-world worst case scenario; more like a really bad month. A workable, realistic budget hinges on some “padding” that will cover you in case of an emergency – like a burst geyser or an extra set of hands for an unexpectedly busy weekend. As they say, failing to plan is planning to fail (Take note: budgeting for extras doesn’t mean that you have to spend that money just because it’s available. If you don’t need it, save it for a time you do.)
Equip yourself with the right tools for the job
Building a workable budget is that much easier if you’ve got the right tools. There are a whole host of programs – some free, some paid – that simplify and consolidate the process, enabling you to work out a budget far more efficiently than if you were to make a go of it with ye-old pen and paper. Budgeting software favourites that won’t break the bank (or your brain!) include QuickBooks, Xero, and FreshBooks.
A budget that worked for you six months ago won’t necessarily be realistic today. It’s easy to get sidetracked by the long list of day to day tasks associated with running a business, but if your budget is going to be the actionable tool it should be, you need to update it in line with fluctuating numbers. In addition, do a periodic recon of your existing suppliers to ensure that you’re getting the best deal – vendors may be happy to adjust their fees in exchange for a fixed contract or bulk orders.
Like doing your taxes, putting out the recycling, and being a functional adult in the world, budgeting is an unavoidable aspect of running a business. If it feels more difficult than it should, tell that fake-new touting inner critic to shut it. Like any skill, budgeting well takes time and practice.