Whether you need to reduce your expenses to make it through economic headwinds or you want to improve your margins to free up more working capital for growth, budget control is an ever-present challenge for business owners.
This is especially true for microbusinesses, where resources can be limited, and maximum value must be squeezed from every pound spent.
But with so many inflows and outflows to keep abreast of, optimising your business expenditure can feel overwhelming. However, there are a few simple strategies that you can implement to quickly get more control over your business budgeting.
From managing your energy usage to setting goals and being responsive to changing circumstances, here are our top tips for small business budget control.
Set clear targets and delegate
Smart budget control starts with establishing clear business objectives and short-term and long-term financial goals, including revenue targets, profit margins, and growth plans. These objectives will serve as the foundation of your budgeting process and provide a clear direction for your financial planning.
If your business has department heads, or even if it just has a handful of team members covering different roles, delegating budgeting control to these individuals for specific business functions will share the administrative burden and make it easier to meet your goals and successfully manage costs.
Track and monitor your expenses
You should regularly track and monitor your expenses to ensure that you’re sticking to your budget. The best way to do this is by using accounting software, which allows you to automate expense tracking, analyse business data, and forecast projected costs and revenues.
You can generate financial reports to show trends over time, which you can then use to spot any discrepancies between your planned budget and actual spending that could impact your cash flow. That allows you to respond quickly to any changes before they become a problem.
Categorise expenses and implement consistent processes
Organise your expenses into fixed and variable categories. Fixed expenses, such as rent and salaries, stay relatively constant over time, while variable expenses, like advertising and raw materials, can change based on business activities. By categorising your expenses, you’ll have a clearer understanding of where and why you’re spending money and you can identify areas for potential savings.
Monitor and control your energy usage
Business energy usage is an expense that’s well within your power to control, and with a smart meter, it’s easier than ever.
Smart meters allow you to track your energy usage and costs over time, so you can see how much energy you’ve used and when.
You can then identify where you might be wasting energy and make improvements to be more efficient. This could be as simple as turning off lights and appliances when they’re not in use or investing in energy-efficient equipment.
Whether it’s your energy, software, or broadband, switching to a supplier that offers your business a better deal is one of the easiest and most proactive budgeting control measures you can make.
You should regularly review the market and compare quotes to see if you can find a more cost-effective supplier or simply a better tariff with the same supplier. As long as you’re not bound by any contractual terms that would prevent you from doing so, in the case of energy and broadband, the switch can often be arranged for you by your old and new providers, meaning less work for you, and more time to spend on growing your business.
Review and revise your budget
Circumstances won’t stay the same and neither should your budget. Whether global events drive up the cost of raw materials or growth plans need to be rejigged, as the needs of your business and market conditions change over time, review your budget, and make adjustments as needed to account for those changes.
For example, If your expenses are consistently exceeding your budget in one particular area, identify the cause and take action to reduce costs. Or if you find yourself consistently under budget, re-evaluate your goals and consider investing in new opportunities for growth.
Reduce unnecessary costs
Even with advanced accounting software, it’s not always easy to see exactly how expenditure translates into meaningful value for your business, but waste doesn’t just come in the form of energy usage.
If you suspect something is an unnecessary cost, conduct a cost-benefit analysis to check whether the former outweighs the latter.
For example, if you have a software subscription to a platform that you don’t use or that isn’t helping your team’s productivity, cancel it. If you’re spending money on a Facebook advertising campaign that’s getting very little engagement, ditch it and explore more worthwhile marketing channels. If you offer a product line or service that isn’t selling, it might be time to withdraw it and rethink your strategy.
The task of controlling your business budget will never end. But by applying the strategies outlined above, it can be a rewarding exercise for you and your team, helping you to ease your administrative burden, take charge of your finances, and freeing up time and resources that can be directed towards growing your business.
And remember, you’re not alone. Delegate expense management to responsible colleagues, communicate budget control measures effectively to your team and invest in technology that drives real value for your business.
Click here to get a smart meter for your business.
This article is part of a paid-for information campaign for Smart Energy GB.