Tax season may be gone, but it’s never a bad time to review your budget. With the help of budgeting, you can gain several benefits for your SMBs that often go unnoticed otherwise. With the help of a budget, small and medium business owners can better assess their financial needs, fulfill tax obligations, find equipment loans for small businesses, and more.
In this article...
- Comprehend your Sales Cycle
- Plan for unexpected expenses
- Get financial help from a CPA
- Apply for financing sooner than later
- Re-assess your budget from time to time
- Remember time is money
- Stick to the budget you create
- Keep business and personal accounts separate
- Start budgeting today
According to reports, there are over 33.2 million small businesses, which makes a massive number if you consider it all. It’s understandable if you’re struggling with your budget requirements, so we’ll share some tips to help you get started for 2023.
Tip # 1: Comprehend your Sales Cycle
The operations of your company will vary through different economic and financial conditions. Businesses need to prepare for these changes to ensure long-term industry success.
Moreover, many small businesses have an “off-season” where their sales or revenue may drop significantly. So, business owners need to assess their financial situation from time to time.
By learning about their financial health, business owners can readily determine where their companies will stand at the end of the year—contributing to better asset management. It may also help you make changes to the sales cycle and deploy a more strategic idea when needed.
Once you understand how the sales work, understanding the profits, revenue, or general cash flow isn’t a big problem. You can even ask an expert to help you draw a detailed breakdown of your sales. They can help elaborate on certain changes your business needs to stay ahead in 2023.
Tip # 2: Plan for unexpected expenses
Unexpected expenses are a part of business, regardless of the industry your SMB is a part of. Business owners must prepare for these expenses to stay afloat under financial turmoil.
An emergency fund makes it easier for these businesses to gain an advantage from these changing financial conditions. It also helps with sudden expenses such as equipment needs. It’s why business enthusiasts invest readily in small business equipment financing.
According to most financial experts, business owners must have 3 to 6 months of emergency funds ready. Fortunately, you don’t have to prepare this fund instantly—but you can build it up over time. With this fund, you’ll be able to counter setbacks and use emergency funds wherever required. We also recommend taking a step further and having at least a month’s cash on hand to use as required.
Tip # 3: Get financial advice from a CPA
Regardless of how well business owners think they can handle their financial requirements, a Certified Public Accountant (CPA) is still an important professional for an SMB. You can never address all your SMB business requirements completely without professional assistance.
Hiring these CPAs is a good idea as they help with financial planning tailored to specific business-related tasks. They can help streamline different financial tasks, such as tax payments, budgeting, asset identification, and more.
You should reach out to them for advice and follow what they recommend to ease the process. It’s the smartest idea to ensure your business runs smoothly, even with financial uncertainty.
Tip 4: Apply for financing sooner than later
A lot of your business’s success depends on your equipment quality, which is why equipment loans for small businesses are so common. With the right equipment, you have the best approach and can avoid mistakes with financing. Unfortunately, equipment costs are one of the highest ones for any SMB.
However, that still doesn’t mean your business needs to operate without the extra equipment. In fact, with equipment financing, you can afford better equipment and meet business requirements better in 2023. The best part about equipment financing is that it’s highly convenient—almost every SMB can benefit from it.
With the help of equipment financing, small businesses can break down equipment costs into smaller payments, making them easier to pay for. Moreover, you can utilize the equipment in business operations, earn a profit, and re-invest the amount for more equipment financing—making it a great option to see business growth.
We also recommend using a financing calculator if you’re unsure of how much you will be paying at the end. With the help of these calculations, you can project your costs for different business-related expenses. For example, you can add the monthly expenses for the following:
- Equipment costs
- Tax savings
- Utilities, etc.
These calculators make it easier for business owners to achieve a breakeven point. The breakeven calculation is particularly great for business owners that are just starting.
It helps put the number of jobs needed for equipment payment into perspective. Technically, your equipment will pay for itself, depending on the 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: Re-Assess your Budget from Time to Time
Budget creation is an important aspect of business, but it doesn’t remain the same. Businesses should know how to make budget adjustments based on the business changes within the industry. By re-checking the budget you have set, it’s easier to make changes to the budget.
Improve business actions that aren’t right, and repeat the ones that give you the required results. This timely change scales business, allowing SMBs to grow over time.
The finance team usually does the re-assessments, allowing the owners to learn more about their current expenditure structure and get the best results from it. Typically, you should re-assess the business budget through every business quarter; you can do it bi-annually if you don’t want to overcomplicate it.
Tip# 6: Remember Time is Money
The biggest mistake you can make as an SMB is forgetting to add time to your company budget. Time is truly money for businesses, especially if people are paid hourly.
It can be experts or employees on your team that get paid on an hourly basis. It can also be a tool or software you pay for each month. These payments add to your business expenses and may become a serious issue if not managed timely.
You can also ask your team to assist with this task, allowing you to scale small business operations without going overboard on your budget.
Tip # 7 Stick to the Budget You Create
Creating a budget for your business this year seems like a great idea and could help your SMB. However, all your financial planning might go to waste if you do not stick to your budget in the future.
The budget you create is more than just a tone-setter for your business venture. The budget also serves as a blueprint for the upcoming year. It helps understand your business expenditure, business-related expectations, and more.
However, an accurate revenue forecast is one of the biggest challenges with this. Everything related to your business, from Research and Development (R&D) to business operations, flows from there. It also determines the flow of your profits, so give it some time before making a strategic change.
Your budgets are also vital for showing your financial responsibility as an SMB. The more structured and elaborated your business budget is, the better it demonstrates responsibility with money. It also showcases planning capabilities—making it the perfect indicator for other professionals within the industry.
However, a budget and all its benefits go down the drain if you don’t follow it through. It’s tempting to keep experimenting with your budget, but you must give it time to see better results.
The budgets should still be flexible, and the business owners can change them as required. However, the better you stick to your budget, the fewer financial issues you will face later in the year.
Bonus Tip: Keep Business and Personal Accounts Separate
In the first few years of your business venture, merging your account with your company’s business bank account may sound like a great idea.
However, it’s not. Commingling personal and business finances overcomplicate everything when the taxation period begins. Almost every business owner faces troubles because of this at least once. A better alternative instead is to keep your company and personal spending separate.
By separating the business and personal accounts, you can save yourself and your family from being personally liable for business loss.
It’s the one thing that ensures your dream business doesn’t become a nuisance for your family. We also recommend keeping your tax payments separate for business and personal accounts to keep it simple. Separate your accounts, and you will thank us later on.
Start Budgeting Today!
The most important way to make your business grow efficiently is to focus on budgeting it. As a small business owner, you will face issues with budgeting. However, following the tips we’ve listed down ensures you don’t face trouble with it later on.
If you are still unsure how to manage your budget in 2023, contact a CLFP from Beacon Funding. These professionals can provide expert advice on financing equipment, equipment loans for small businesses, and more.
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They can help you better understand your business and utilize the tools for business-related tasks.