Being a small business owner is tough work. Every dollar counts, which means that it’s very important to be able to budget everything properly in order to avoid big financial mistakes. Unfortunately, there are still some small business owners that are too focused on acquiring and retaining customers and neglect to budget their finances.
Here is a list of eight common small business budgeting mistakes so that you can avoid them!
Not Keeping Track of Expenses and Revenue
Are you monitoring the performance of your small business regularly? It’s important to track the funds that enter and leave your business to be able to make reasonable decisions that’ll steer your business away from the red.
Reviewing your budget periodically also allows you to determine which numbers are underperforming. For example, if a product of yours is making this amount in sales, but it’s considered underperforming, then you know what steps you need to take in order to improve its performance.
Not Creating a Budget
Believe it or not, this is still a common error small business owners make. Not having a budget while spending is going to be a grave financial mistake that can instantly drown your small business into debt. You need to account for any unexpected expenses that you need to cover, and the best way to get organized is through business budgeting.
There are budgeting software programs you can purchase to make your life easier, but you can also do it manually through paper and pen, although you may have to create a digital copy of it just in case it goes missing.
Managing Expenses Poorly
It can be difficult to handle funds if it starts coming in, and spending excessive amounts of it can be easy even for small businesses. Without proper budgeting, the costs can start to pile up instantly. Hiring more employees than needed or too many stock of a certain product can be unnecessary costs that will affect the finance of your small business.
The Business Strategy and Budget are Not Aligned
If your business strategy and budget are not aligned, then you won’t be able to keep track of the financial goals of your small business. Additionally, you’ll have no idea whether you’ve met your financial expectations as well as where you should be allocating the money appropriately.
Forgetting to Budget for Taxes
Every year whether you like it or not, Uncle Sam pays a visit to collect the taxes required to be paid. Many small business owners forget to allocate a portion of their funds for taxes, making it a problematic situation for you and your accountant if you have one. To make things a little easier, you should immediately set aside money in increments to be able to pay Uncle Sam on time when tax season comes.
No Backup Plan is Created
When things don’t go as you expect, having a backup plan can be the saving grace for moments like this. This can be in the form of having a list of angel investors, looking for cheaper retail rent prices, or applying for financing. You shouldn’t have to wait last minute just to take action when the situation goes downhill.
The Budget is Not Up-to-Date
When you have a budget for your small business already, that doesn’t necessarily mean that your work is done. While the budget acts as a roadmap or blueprint for your small business, it’s still something that needs to be revised from time to time. The budget is tailored to the current situation of your small business, so once it grows and there are more expenses this time, then you will have to account for those factors too.
There’s No Small Business Emergency Fund
An emergency fund is a financial safety net that’s appropriated for unplanned expenses such as a change of supplier, an employee leaving, or broken equipment. By having reserved cash for situations like these, you’ll have a more organized allocation of funds, and you won’t go into panic mode by the time you actually have to use it.
Make Budgeting Easier With REIL Capital’s Financing!
Budgeting can be tricky, especially for small business owners that have little funds. REIL Capital understands what every owner goes through, and that’s why we’re here to help! Browse through our list of financing services to see which type of funding interests you, and get in touch with a capital specialist to assist you in determining which service is best for your small business.
When you’re ready, you can apply now!
