Why is budgeting a key to small business success?

Why companies or say start-up companies need a fully fledged budget plan to successfully run their business? But the question is why? What will happen if they just spend money on priority expenses without following any plan? What will be the consequence of this activity?

We will answer all above questions and budgeting related confusing in this article and will also provide the best solution for profit-oriented budgeting for small business and start-ups.

Budgeting is the process of allocating or segregating money or budget in a proper way to meet all expenses in a month or year. Budget is the total amount a business or an individual fixed or set for a month.

This budgeting plan helps business owners to give more focus and set a budget for most important spending than least important.

Budgeting is also called budget planning. In the beginning of every financial year or every month, a business owner needs to set a budget for each individual activity. It helps to check the revenue percentage earned from each spending also to check the variance between planned expense & income and actual spending & revenue earned.

Budgeting also helps to understand the cash flow status in real time. The best way to do a perfect budget planning is by using a budgeting tool. A budgeting tool helps a business owner to know the current cash/capital available, estimate expenditures and forecast revenue.

Here are some key reasons for why budgeting is important?

  • To curb expenses

At the end of every month, a business owner wonders where the money goes and how expenses reached new heights. This should be answered immediately with a proper solution to have a hold on future expenses. Expense tracking is the only & best way to curb expenses, which ultimately help to take strategic business decisions. The best tool to get all real-time expense details is SlickAccount.

“A budget is to tell your money where to go instead of wondering where it went”

  • Brace for any future & uncertain expenses

Expenses can never be forecast so as a business owner you should brace yourself to face any uncertain situations like new asset purchase, office shifting, employee salary hike etc. Budgeting helps to make your business sustainable in any kind of unforeseen situations or expenses. Plan your budget accurately and include other possible expenses on monthly basis. It’s the best way to manage a business.

“Budgeting has only one rule, do not go over budget”

  • Oversee growth of set goals

To map proliferation of sales target in comparing with revenue percentage is a very complicated task. You need to have the details of monthly revenue and it comes from which activity, which sales employee etc. These details bestow business owners with a clear idea where to spent more to get most revenue out of it. First, make a budget for sales then compare it with the percentage of revenue earned in a month to reckon the variance between anticipated revenue percentage and earned revenue percentage. Budgeting also helps to increase the rate of ROI. Know your last month expenses and prepare a budget which will give you more return in less invest as budgeting is the first step towards business growth & success.

“Beware of little expenses; a small leak will sink a great ship”

  • Forecast future profits

Forecasting is an analysis method to ascertain the actual business growth & profitability. This in-depth analysis helps business owners to find out areas need improvements for more sales and for more revenues. Analyse & know how much to spend on every aspect of your business from marketing channel performance, ads performance, project-wise profit, customer-wise profit etc. only with SlickAccount. This tool would analyze & generate performance metrics based on past & present expense & revenues also solutions to get rid of any shortfalls.

“Nothing happens without focus. Don’t try to do everything at once. Take one step at a time”

Above mentioned some noted reasons to do budgeting. Now how to do it perfectly and where?

The best way to do a perfect budgeting is to use software, which will save a lot of time and will render accurate data.

The best tool for budgeting is SlickAccount’s ProfitBoard and what to expect from it.

Here is the perfect roadmap for a profitable budgeting & business growth for small business & start-up’s using ProfitBoard:

  • Cash flow management
  • Due payment details
  • Sources of Fund
  • Budgeting
  • Finance Analysis
  • Forecasting

Let’s discuss in brief all above points…..

  • Cash Flow management: Cash Flow management is the best way which will guide business towards a profitable and realistic budgeting. Why & how Cash Flow management would be helpful? Before doing budget plans first the business owner need to gather all information pertaining to expenses, incomes, most profitable marketing channels, less demanding products in the market, production cost, operational costs etc. A cash flow statement can provide all these details at one place or in one report to the business owner. So cash flow management is the first step towards profitable budgeting.A sample of cash flow list by ProfitBoard:
  • Due payment details: Payment details also very necessary for budgeting. If the business owner or planner knows the payment details like whom to pay or how much-uncollected payments beforehand then he can segregate budget accordingly like for operations cost, for asset etc. in a proper and better way.A sample of due payment details by ProfitBoard:
  • Sources of Fund: Sources of fund enables business owners to have a clear view about how much cash available in company balance and company’s operational cost funded by which fund whether from a loan, sales revenue, investment etc. It’s the best way to decide how much to allocate for the operational cost in budgeting.A sample of “sources of fund” by ProfitBoard:
  • Finance Analysis: Financial analysis & budgeting both dependent on each other to perform activities. Financial analysis can’t be completed without doing budget analysis and budgeting is backed up by financial analysis. The financial analysis involves business evaluation, project performance evaluation, analysis of budgeting, cash flow statement, balance sheet etc.  This information would help the business owner or finance manager to prepare a realistic budgeting.A sample of cash flow list by ProfitBoard:

ProfitBoard is the best solution for budgeting, cash flow management, forecasting, financial analysis etc. We also have a free trial for our new users. Sign up for a free trial.

Read: Cash Flow importance for a business & how to do it effectively?

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