Those operating a business may find the new year has brought new money challenges that many businesses are facing for the first time. A few years ago, most businesses did not need to purchase personal protection items or items related to the pandemic. Now, almost every business is having to purchase face masks, hand sanitizers, and more.
Below are a few tips for businesses to help them budget for the current economy. While there are many great tips about budget planning, the following are tips that apply to businesses. Every business should have a budget. They should be looking for ways to save money, invest in advertising to help drive sales, plan for unexpected dips in the economy, and not be afraid to reevaluate the budget if needed.
Tip One: Make Sure the Budget is in Writing
The first tip that a business owner should take to heart is to ensure that their business budget is in writing. Some business owners use budgeting software, some use budgeting apps, and others use traditional notebook paper. It does not matter how the budget is recorded as long as it is written down and accessible to those who need it.
Not having a written budget is one of the biggest mistakes a business owner can make. A business owner needs to know their current funds, their estimated sales, and how much money they can spend in each budgeting category. Without a budget, a business owner can easily go into the hole and wind-up bankrupt. A budget is smart and easy way to see if the business is making a profit or running in the red.
Those who do not currently have a budget start by looking at past business receipts and the costs involved with running the business. Write down how much is spent by the business, such as labor costs, supplies, advertising, food, utilities, rent, building maintenance, and any other categories that apply to the business. Next, look at sales and make sure that the business is spending less each month than what it brings in from sales.
Tip Two: Look for Ways to Cut Costs
Once the budget is in writing, look for ways to cut costs. If Tuesday nights are slow, consider scheduling fewer employees that night and saving on labor. The funds saved on labor can be put into other categories, such as an emergency fund.
If a company notices that their office supply spending is high, they should gather their receipts and see what the company has been spending their money on. If the business owner notices that the cost of paper supplies seems high, shop around for a cheaper supplier. It can be smart to buy some bulk items, as buying in bulk can mean getting a big discount.
The more money a business owner saves by cutting costs, the higher the business profits will be. If the company is spending less on labor and finding lower-priced suppliers to buy from, they will not need to increase sales to make larger profits. In many instances, saving money can be just as good as making money.
Tip Three: Do Not Skip Business Marketing
One area that it may not be smart to cut back on is marketing. Sometimes, it can take money to make money, and marketing is a great way to bring in new customers who may not have heard of or shopped with the business before. While it’s smart to cut back to generic paper plates in the office break room, marketing is an area where a business owner may want to increase their spending.
Spending money on marketing can also help a business understand the customer buying process. Many people may be going to the business website, shopping around, adding items to the cart, but never make a purchase. Marketing companies can help a business develop a sales funnel and keep people from deserting their shopping carts. This can mean a lot of extra revenue for a business, so it is genius to invest in.
Marketing can get the business in front of new people who may have otherwise never stumbled on the business. Marketing campaigns can help business owners research where their customers are coming from and how they are finding the business. This type of research can let the business know which marketing avenues are getting the business owner the biggest bang for their marketing dollar and which marketing campaigns maybe are not worth reinvesting in.
Tip Four: Always Plan for the Unexpected
Business owners do not expect a pandemic or a natural disaster in their area, so they usually don’t save for these. Smart business owners plan for the unexpected and budget for emergencies. The goal should be to build up enough money in the business account so that the business could pull through if their building were damaged by fire or flood. This is also smart just in case sales are down for a month or two, as having savings can mean the difference between a business surviving and having to close.
Tip Five: Do Not Be Afraid to Adjust the Business Budget
A budget should be frequently evaluated to make sure that the numbers and estimates are still reasonable. If, after a few months, the business owner realizes that they keep going over their budgeted labor costs, they may need to crunch the numbers again and move some funds from other categories to the labor fund. Some categories may be phased out completely, such as those for personal protection equipment, and some new categories may need to be added.
In conclusion, many businesses face new challenges that, ten years ago, they never imagined would come up. Many businesses have to spend money on pandemic-related items and are having a hard time with consistent sales. This is why a budget is important, as it helps a business gain control over its spending and finances. A budget can also help businesses save funds for a rainy day or an unexpected expense.