04 Aug Your budget is the most important part of your business success
Chris Bruchhausen and Gareth Price are the founding owners of Investmint – an online platform connecting businesses in need of loans, with investors looking to grow their capital. These entrepreneurs understand business, money, and profit, as well as the importance of small – medium size businesses in South Africa. A big part of profit management is ensuring your budget aligns with your goals. A budget is about telling your money where to go, rather than wondering where it went.
7 tips for a good budget:
A budget must be realistic
The budget needs to be realistically achievable. If your sales have never crossed the R500k mark in a month, it is probably unrealistic to budget R700k.
A budget is not something that is done once a year
A budget is a moving, living document that needs to be updated for all changes that occur. If you lose a client – your budget must change. If you gain a client, you need to assess what impact that will have on your cost structure and if it will change your budget. If you have exceeded your targets, you need to set new ones. If you find that you’re not hitting the targets, you need to assess if they are realistic and change them accordingly. Your budget needs to be reviewed each and every month – and changes made when necessary.
Your budget is worth nothing if it isn’t compared to actual figures
A budget isn’t something that gets done and never looked at again. You can never hope to get the maximum benefit from your budget if you never compare it against what actually happened. This will help you identify inefficiencies and shortfalls BEFORE it is too late and plan a solution.
A budget is a limit, not a target
Just because you are ALLOWED to spend a certain amount on entertainment, does not mean you HAVE to spend that amount. You should always be on the lookout for ways to reduce unnecessary spending in your budget so that money can be reprioritised.
Never budget to Zero
If you have planned to spend every Rand you make, there will be no way that you can handle the inevitable curveball when it comes. You need to make sure there is something in reserve for when things do not go according to plan
Budget for a profit
Profit is our primary goal and motivator – and if our budget is supposed to represent the goal and plan for the business then we need to be budgeting for a profit.
Budget to pay yourself a salary
Your business won’t survive if you don’t survive – and if you are struggling to make ends meet then you won’t be able to give your business your best effort. Make sure you have worked out your own personal budget (the points above apply equally to a personal budget and a business budget) and include a reasonable salary for yourself in your business budget. After all, a salary for you is something your business HAS to be able to generate – otherwise it is not a viable business at all.
For more please visit www.investmint.co.za.