So it’s a new financial year, you’ve handed in your accounts for the last twelve months to your accountant and now it’s on to 2019/20.
Have you reviewed last year’s budget? Did you even have a budget?
I’ve talked before about how important it is for a business to know its numbers. You can’t know if you are heading in the right direction if you don’t know those key figures. Whether it’s the number of visitors to your website, the number of leads you convert, or how much you can afford to spend, it’s all key to running a successful business. It’s also key to better inform your spending decisions.
There are several reasons why all businesses should have a budget, no matter how small they are.
- show you how much income you need to bring in to cover the business running costs
- determine what the opportunities are for reinvestment and capital purchases
- find out when you can afford to hire help (this is an important one!)
Don’t end up in a position where you are working harder but your earnings left over after paying basic personal and business expenses are not getting any higher. There needs to be some reward for all the effort you are putting in, right?
Ideally there needs to be some science behind the numbers.
- Did you create a business plan? Did you cost this up?
- If you’ve been trading already, can you benchmark against last years accounts?
- What changes do you foresee in the coming year?
Accounting for known expenditures that will be carried forward to the next year is the easy bit. But how about those softer things like networking meetings, business support, training events? How many can you afford to attend? How many can you afford NOT to attend? Marketing, business support, training and networking is all about growing your business so you need to make sure you have included all of these areas. Last year GDPR cost a lot of businesses a lot of money, and this year it’s Making Tax Digital and the systems that some small businesses need to invest in.
And you also need to have an idea what you expect to be able to earn. Have you forecasted how much more business you expect to take on? What proportion of this will be profit?
When I prepared my budget for 2018/19 I knew that I would be growing my team and the additional costs that this would involve, in providing equipment for the team but also in upgrading the systems that I would need to manage them. I also knew that I wanted to improve the information that I gave to clients, and the systems would need to support this. I knew I wanted to engage the services of a business coach to keep me on track and also that there was a networking group that I wanted to join – and none of this comes for free.
Having a budget means that you can work out what your baseline is and how much you need to be bringing in to ensure the essential and non-negotiable outgoings can be met, and that you can pay yourself a wage!
Here are a list of 20 things that you should factor into your business budget.
TIP I tend to use the same categories that I use for my accounting, so it makes it easier to assess where I am against budget at any time.
Fixed costs that are the same year on year should be easy to work out, but some intelligent estimating will need to be done for variable expenses like travel and subsistence.
- Audit and accountancy fees
- Membership fees
- Bank account fees
- Equipment servicing and repairs
- IT support (incl. back ups and security)
- IT software (systems)
- Legal fees
- Travel and accomodation
- Networking costs
- Postage and couriers
- Printing and stationary (office supplies)
- Telephone and internet
- Training and development
- Business support (your Virtual Assistant and Web Designer)
- Business development (marketing)
- Emergency fund*
*always add in an emergency fund for the things that you didn’t anticipate! Treat your budget like you would if you were planning any project and ensure you factor in a buffer.
Don’t forget to check in and review your position against your budget every quarter. It doesn’t need to be a time consuming exercise, just check if you are on track or if you need to pare anything back. And don’t be afraid to amend and update your budget if something else has come to the forefront that you hadn’t taken into account before.
Have you prepared your budget? Is there anything else you feel should be included?