If you have just purchased or opened a small business, you may know your trade well, but when it comes to budgeting, your skill set could be lacking. If you are like most small business owners, budgeting is your least favorite managerial task. That is because budgeting is not an exact science – especially during changing and challenging economic conditions. In fact, you may see your actual budget vary significantly from your planned budget during economic difficulties.
When there is a downturn, and you need to tighten your financial belt, you will need to re-evaluate your budget and make some changes. Read on for five simple tips that will help your small business put together a top-notch budget.
1. Emphasize Customer Service
During rough times, your business may not gain many new customers. In order to hold on to those you do have, you will need to provide excellent customer service. Outshine your competitors to retain the sales you already have after the economy improves.
2. Cut Costs
When times are tight and cash is needed to advertise, pay a crucial bill, or capitalize on an opportunity, cutting costs is essential. Take a look at which budget items can be controlled or altered – put off making purchases until the next billing cycle, or ask creditors for a change in payment terms.
3. Talk with Suppliers and Clients
When difficulties loom, talk with your company’s suppliers about renegotiating your credit terms If you have had a good relationship, chances are that the vendor will work with you to lower your minimum payments, adjust a due date or reduce your interest rate. At the same time, keep in contact with your own clients to ensure they pay you on time. Call any clients that have gotten behind on their invoices, and encourage them to get their accounts current. Consider offering a discount to clients for paying their bill in full now. Check your books and make sure you are billing all your clients in a timely manner.
4. Issue Employees Business Prepaid Credit Cards
Many small businesses allow some flexibility in what their managers, representatives and salespeople can charge to the company. Rein those costs in by providing your employees with business prepaid credit cards and establish some hard and fast rules about what they can be used for. Choose a plan that allows instant funding from your mobile device or computer when expenses come up, rather than depositing lump sums in advance that may tempt spending. Track the business prepaid credit cards through your computer or mobile device, to monitor how the funds are being spent.
5. Reduce Administrative Expenses
To keep your budget on track, slash your office expenses and administrative costs. Eliminate company travel and entertainment as much as possible. While it is smart to buy office supplies such as envelopes or toilet paper in bulk for maximum discounts when finances are good, when budgeting gets tight, only spend when absolutely necessary. Cut back or eliminate expense accounts, membership fees, lunches out, unnecessary services. Do your own maintenance and mow your company’s lawn yourself. Limit long distance telephone calls. Consider every possible way to cut corners and lower costs without seriously compromising your business. Request employee input into which expense areas could be reduced.
Bottom line – small business budgeting is a fairly easy but essential process that will allow you to forecast and match your current and future income and revenue to your monthly expenses. Ensure that enough money is available to keep your operation up and running, to expand, compete, and to guarantee a solid emergency fund.
About the Author: Marilyn Smith specializes in covering the latest news of interest to small business owners, including business prepaid cards.