You only need two things to succeed at anything:
- An idea
- Enough resources to see it through
This is what budgeting does for you; it ensures that you don’t run out of resources before you reach your goal. Now before anyone becomes too nitpicky, time, effort, and motivation are also resources (kind of).
Still, in the business world, we’re talking about conventional resources. If we’re being even more precise, we’re talking about money.
So, here’s how to improve your budget planning strategy and always know how much money you have at your disposal.
1. Keep It Flexible
First, you must understand that you’ll never get the exact number right. There are always some unexpected expenses. Sure, your rent is supposed to be the same every month, but your office utility and maintenance bills will not. So, the budget as a whole is quite unpredictable.
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The most important thing to understand is that this unpredictability is never in your favor. You will start with all the expenses you can think of; the only outcome is that you’ve forgotten something. Generally speaking, your income sources are fewer than your expenses, and a chance of omitting one is next to non-existent.
So, when planning a flexible budget, make a projection so that it’s a bit less favorable. This way, if it turns out that you need less money, you get to redirect this bonus.
If it turns out that your projection is fairly accurate, you will have the means to weather the storm. Either way, you’ll have a contingency plan and a best-case scenario.
2. Three-Point Estimating
As mentioned, getting the exact figure you’ll need is impossible. This means that your safest bet lies in making an educated guess – an accurate estimate. However, why not make three of them?
- Make one estimate where you plan with the best possible outcome in mind. In this situation, you pay the bare minimum, and there are no unexpected occurrences.
- Your second estimate should be the worst-case scenario. This is a scenario in which everything goes wrong. You have an unexpected expense, a breakdown on an expensive piece of equipment, and a myriad of smaller inconveniences. Still, you shouldn’t push this too far and go into doomsday scenarios. In other words, you’re not planning for your office space to catch fire and must rebuild it from the ground up.
- The third plan should revolve around the most-likely scenario. If you’re already in business, you can take the average for the past few months or the same month of the previous year as a guiding beacon.
Covering all three of these scenarios will prepare you for almost every eventuality. You can even take an average of these three estimates; however, this figure can be misleading.
3. Stick To Lists and Templates
Your budget planning needs to be systemic. There are many reasons behind this. You will budget time and time again, which will allow you to analyze and compare your budgets.
In the previous section, we’ve already mentioned comparing your budget projection from the previous year and using it as a resource for future budgeting. This is easier if you stick to using the same template.
Even a simple Google budgeting template can make a world of difference.
This can make it easier for you to find any information you’re looking for and make your financial data more structured. Structured data is easy to handle even without a sophisticated (and expensive) content management system.
4. Try Cutting Costs
You are left with your profit when you deduct the expenses from your income. So, while one obvious way to increase your profitability is to increase your income, you could also try reducing your expenses.
The true challenge here lies in cutting expenses while maintaining the quality of the product. Sure, buying a cheaper raw material will result in lower costs. They will also diminish the quality of your products, eventually resulting in more cashback claims and a ruined reputation for your business.
However, there are areas where you can save money without sacrificing quality. For instance:
- Switch to an open source
- Buy used equipment
- Always negotiate
- Change to a remote or hybrid workplace
These are just some of the ideas that won’t necessarily change the quality of your work, but they may revolutionize your budgeting. You can also adjust your objectives to your budget. For instance, you can run an SEO campaign even on a budget, but this requires a different approach.
The key is realizing you need to spend money to make money. Every time you change something, you risk starting a chain reaction that won’t necessarily benefit you. So, always take as many factors as you can into consideration.
5. Track Everything
The main reason you don’t have control over your finances is that you’re not paying attention. The simple answer is – you need to track all your spending.
There are so many budgeting, inventory, and warehouse management platforms that there’s no excuse. You can digitally track every dollar you spend; most of the time, you don’t even have to track this data manually.
You can link your payment gateways, take screenshots of receipts (or scan their QR codes), and that’s it. It’s low effort, and it helps you keep track of everything that’s going on.
This is also the easiest way to prevent corporate theft. Sometimes, a minus is not due to your poor management of resources. It is caused by someone deliberately misappropriating corporate funds. By better tracking resources, this will become much less likely.
Budgeting is a crucial bottleneck in the business world. There’s no business growth without learning how to properly manage your budget. Some might even argue that it’s impossible to survive as a business without it to begin with.
Fortunately, there’s quite a bit you can do. First, try leaving a bit more room in your budget. Second, prepare contingency plans by preparing for several different scenarios. Third, use all the help you can get, regardless if we’re talking about templates or budgeting apps.