Times are tough and I need to manage my budget carefully to...

Times are tough and I need to manage my budget carefully to keep my business open. What tips can you give me?

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As you’re well aware, times are tough and everyone’s tightening their belts. When it comes to budgeting though, there are six things you need to remember:

  • Your budget won’t be perfect. Budgeting means you are guessing what money will be coming in and out of the business in the future. While it is partial guess-work, it’s very important to have one – even if it’s off – to alter your course.
  • Review the process. A budget should be maintained on a continuous basis as it isn’t the budget itself that is worthwhile, but the review that comes with it. Through this you can compare budgeted expenses with actual expenses, and adjust accordingly.
  • What’s changed? Through the comparison afforded by step 2, you are now able to see what’s changed and how it affects your budget. Sticking to it isn’t necessarily the best course of action. By seeing how things have changed you can make budget adjustments based on actual knowledge rather than assumption. If sales are down, for example, driving up prices is not the solution, but lowering your budget for the photocopy machine by changing providers could be the perfect stop-gap until you get back on your feet.
  • Keep it simple. Try to build your budget so the information that comes out matches the people responsible and is relevant. For example, if your sales people have a petrol budget, make sure they’re able to see how their consumption is aligned with the budget.
  • Stick to categories. When you keep to categories over time, it’s easier to spot trends. The key for budgets is consistency.