So, you’ve created a budget for your business. You have a clear vision and a strategic plan. But to ensure your business stays on track it’s important to review your business budget. Here are some simple strategies to help you take control of your business’s finances.
You’ve created a solid budget for your business. Your vision is clear and you’ve established a strategic plan to meet all the financial goals. For many businesses, this is a great first step. But it’s only one part of the process.
To ensure your business is on the right track, it’s important to review your business budget. Here are some simple strategies to help you do this and take control of your finances.
1. Remember to monitor
To properly review your budget, whether it’s quarterly, half-yearly, or annually, it needs to be monitored throughout the budgeting period. This will allow you to spot warning signs as they pop up, determine when and why things have veered off track, and more importantly, take the appropriate action.
Part of the reviewing process means making monitoring a priority. If you haven’t established this already, take the time to set up designated budget monitoring meetings with all the right people – and stick to them.
2. Question your financial goals
When it comes to reviewing your budget, this will be one of the main tasks. Basically, it means looking at all the data within the budgeting period and examining how you performed against your goals. Whether you met your targets perfectly, exceeded them, or fell short – it’s important to question the ‘why’ in each scenario.
The more insight you have, the better decisions you can make going forward – whether this means expanding the business, cutting back on expenses, or staying on the same path.
3. Check for discrepancies (and deal with them)
Nothing impacts a business more than lazy budgeting. After running a variance report, check for any discrepancies in your budget data. If there is, it’s important to get to the bottom of what’s causing them. For example, if your actual marketing spend for six months was triple its budget – and this wasn’t planned or accounted for – then something has gone wrong.
Of course, it’s normal to spend more than what’s in your budget, but only if you assumed you might. If you don’t find out why discrepancies exist, you can risk misjudging your cash position and running yourself into severe debt.
The point is, it’s important to look for things that don’t make sense in your budget review. This will give you a better grasp of your finances, as well as help you learn from mistakes.
4. Assess your cash position
Understanding your overall cash position is one your final steps in reviewing your budget. You need to determine things such as:
- How much cash you have on hand
- Whether you have more or less than you expected
- If there is enough money in the bank to cover business operations
- If you need to take out a loan to manage any cash flow issues
Your cash position will impact your priorities over the next budgeting period, so make sure you have a crystal clear figure to work with.
5. Plan for upcoming expenses
With a solid idea of how you performed against your budget, you can start planning ahead and adjusting your budget accordingly. For example, ask yourself questions such as:
- Are you throwing a Christmas party?
- Does the business need to re-register?
- Will there be a rental increase for the office?
- Will you be travelling in the next couple of months?
- Do you need to hire more staff for a new client?
- Will you need more supplies, office space, or computers?
Planning for future expenses is an important part of reviewing the budget. It will help give you a clearer idea of what you can and can’t afford.
Whether you need to establish a budget or you’re at the stage of reviewing, it’s important to take the task seriously. Budgeting can be complex and overwhelming, so don’t be afraid to seek professional help or guidance if needed.