If you haven’t already, it’s time to prepare your business’s 2023 budget. Having a budget can help you anticipate cash inflows and outflows, prepare for tax obligations, identify financing needs, and explore growth opportunities.
According to the Small Business Administration, half of all small businesses fail within the first five years. Smart budgeting now can help your business succeed and grow.
Not sure how to get started? Here are a few budgeting tips to help your business succeed.
Tip 1: Understand your sales cycle
If your company has an off-season, you will need to be prepared for inconsistent revenue and cash flow. The first thing you need to do is identify you monthly fixed expenses. Bills like rent, loan payments, insurance, etc. will not change, so you’ll need to have enough cash on hand to cover them. Then make a list of your variable expenses like utilities and supplies that vary each month. From there you’ll understand the minimal amount of revenue you need to generate to break even.
Did You Know? Beacon Funding has equipment financing plans to help seasonal businesses! Talk to us about our Skip or Seasonal payment programs.
Skip Payments: You select up to two months you’d like to skip. For the other 10 months you’ll have a slightly higher payment while enjoying $0 payments during your slow months.
Seasonal Payments: Similarly to skip payments, we build you lease with two months of lower payments and 10 months of higher payments.
Tip 2: Plan for unexpected expenses
Every business is going to have unexpected expenses come up. Be prepared by having an emergency fund. That way, you can reap the rewards of the investing your business's cash to maximize the power of compounding.
Financial advisors recommend that emergency funds should cover expenses for three to six months. The good news is that you don’t have to fund your emergency account all at once, you can build it up a little at a time.
Your emergency fund will prepare you for unexpected setbacks. Your emergency fund savings can even be used when business opportunities come up.
Tip 3: Get financial advice from a CPA
Businesses often miss great tax-saving opportunities because they aren’t aware of them.
Did you know that you can deduct all or part of qualifying equipment in the same year you acquired it? Section 179 is a tax deduction for financing equipment. Make sure to consult with your CPA or tax advisor prior to any equipment purchase to discuss the tax savings for your business.
Getting a second opinion from an expert, such as a Certified Public Accountant (CPA), can help you spot potential tax savings.
Tip 4: Apply for financing sooner than later
A big part of your business’s success is having quality equipment that gets the job done efficiently. With equipment financing, it will be easy to afford the equipment your business needs to grow in 2023.
Acquiring equipment through financing breaks down the cost into affordable monthly payments, making it easier to get exactly what you need.
BONUS TIP: Use a financing calculator to project your monthly equipment costs, tax savings, and breakeven point. The breakeven calculation gives your business insight into how many jobs you need to complete for the equipment to pay for itself based on net revenue per unit.
Understanding expected net revenue will help you create a realistic budget and understand how much you can comfortably invest in a new piece of equipment.
Tip 5: Check your budget regularly
Once you’ve created a strong budget, revisit your budget regularly to identify what you need to change or keep doing. Having a better understanding of your budget can enhance your financial decision-making.
Start Your Budget
Opportunities for growth are everywhere, but in order to take advantage of them, you’ll need to start with a solid budget. Start with the above tips and you will be on the right track to success.
To learn more how Beacon Funding can help you start a predictable monthly budget with equipment financing, visit beaconfunding.com/apply