Budgeting your business expenses is a good way to manage the business fluctuations throughout the year. Anticipating the occasional surges and ramping up during the busy times can prove to be profitable for many business owners. If your business what’s considered ‘seasonal’, it will still experience fluctuations. When you can spot these changes ahead of time, you can plan and budget accordingly.
Anticipate the Business Cycle
Anticipating the different business cycles may seem simple and easy but it takes experience and discipline. Being prepared for those slow times when your income lags, is a crucial part of successfully running a small business.
There is more to budgeting than just your capital resources. Lots of businesses decrease their business hours during the slow times, while some completely close their doors altogether. Another option is to reduce the number of staff. But this needs to be discussed with new employees during hire so that they are aware that during certain times you scale back.
5 Things You Can Do to Make Budgeting Easier
On top of anticipating the business cycle, here are five more things you should doe when planning for the future:
1. Don’t put it off—create a plan:
Look at the upcoming twelve months with business highs and lows in mind. Create a strategic financial plan to be better prepared for the slow times when your revenue is reduced. Having a strategy helps to stay focused when times get tough.
2. Stick to the plan:
You first need to budget for future expenses, then create a plan. But in order to be successful, you will need to stick to it. Of course, you don’t have to adhere to it strictly if the situation changes, but make sure you fully understand the plan and the consequences straying from it.
3. Establish benchmarks and goals:
One of the most common causes of small business failure is poor cash flow management. It’s crucial to establish strategies and practices to properly manage cash flow. Once you have those down, always stay on top of your cash flow metric. If cash flow isn’t something your comfortable doing yourself, hire a CPA accountant.
4. Stay on top of your customers:
For businesses who bill their customers through invoices and give them 30 days to pay, it won’t take long for the slow-paying customers to consume the profits you may have had. Which will result in a busy season being not as profitable and put the slow times at risk.
To speed things up, provide your customers with an incentive to pay right away, or have them leave a credit card on file with you to be charged at the end of the month. Your aim is to avoid any possible cash flow difficulties related to slow-paying customers. The faster you get that money, the easier it will be to manage it.
5. Start saving:
Putting money aside for the rainy days shouldn’t be just for your personal budget. When having a business, you can run into many unexpected business expenses which you can better overcome with some saved up money in the bank.
It’s recommended to have three to six months of operating expenses saved up, but having at least something is better than nothing. Smart business owners put aside a portion of their profits on a regular basis in order to always have a three- to six-month cushion for those unforeseen problems.