Budgeting for a small business is never really something to look forward to. However, the use and implementation of a well run budget is one of the easiest ways to keep your business afloat, especially in the first 3-5 years. Your first years in business are full of ups and downs and changing external factors that can make it a wild ride. To curb some of the unexpected obstacles that many new businesses face, a budget revision is needed. Small businesses can utilize a budget revision process to re-allocate revenues, trim excess spending, and make allowances for uncommon or unexpected expenses.
The budget revision process includes numerous steps that can ultimately be beneficial to your small business in the long run if kept up with consistently. With these steps, not only will you be saving money, but you will also save yourself from future complications as well. These steps occur as follows:
Compare your existing budget to your actual spending and allocations from past results.
Although this seems like a rudimentary process in budgeting, many small business owners do not look at the niche expenditures that their business incurs from the previous year. This often leads to imbalances or sloppy numbers when looking at the budget and planning for future expenses.
Look for areas that have recurring shortfall and areas of surplus. These are your areas that need to be reevaluated.
While this is another straightforward budgeting technique, it is also very important for company success. While planning out your current budget, look for repeated shortfalls in past budgets. These shortfalls can be rather detrimental if they are actively taking away from other areas in your business. For example, if a business owner sees that in past budgets there were repeated shortfalls in shipping, the owner should look for surpluses in other areas. This small business owner could take these surpluses and allocate them over to shipping to eliminate the shortage. While many small business owners simply glance over these surpluses and shortages, balancing them out in a budget revision will go a long way for the benefit of your business.
Keep Evaluation Constant and Consistent
It is vital to your small business that your budget revision is not just a one time activity. For each new budget you create, you should always analyze the ones that you have made previously. Regular revision will ensure that your numbers stay consistent and organized which ultimately helps with the finances of your business. To help with organization, keeping a central record of all of your budget revisions will help you stay consistent and on top of your business’s numbers.
Include All Employees When Revising a Budget
Like any small business, each employee plays a large part in team success when it comes to financial planning and action. For businesses that have multiple departments, it is important that each employee is filled in on any changes in financing that occur from a budget revision. This is important because each department has their own unique role in the flow of money with your small business. For the goal of a budget revision to come into fruition, each team member must be on the same page so errors are avoided.
To put it plainly, budget revisions can save you a lot of money while also saving you from pain and confusion down the road in your small business’s life cycle. Although most small businesses create budgets for a one-year period, constant evaluations regularly give the business more leeway in making adjustments as needed. These adjustments are truly what sets small business owners apart from their competitors, when the time is taken to prioritize these budget revisions.