Budgeting is without a doubt one of the most boring and tedious tasks of running a small business. This is partially because something so important should logically be at least a little exciting, and you don’t reap the benefits of sticking to a budget until much later on. These benefits, however, are quite plentiful as long as you make budgeting a top priority. Once you have established a budget, you know exactly what you’re going to do, how you will spend your time/money, and what kind of results you are predicted to achieve by using your resources this way.
Devoting your time and energy to budgeting is a lot easier when you know the specific rewards that will be waiting for you in exchange for your hard work. That being said, here are a few vital tools that are within the reach of any small business owner who sticks to a budget:
1. KNOWING WHAT TO PRIORITIZE
The prioritization of goals can be stressful because you aren’t always sure which responsibility should take precedent over another. Which should get done first? Which will hurt you first if it goes ignored? Budgeting gives everything in your organization a calculated label. Without this form of association, all responsibilities seem equally threatening, prompting you to act on your emotions as opposed to your intellect.
Think of the budget as a right hand-man, or a person to consult before you move forward with an initiative or figure out what to spend your money on. Examining your budget helps you ascertain that you have made the right decision and earned the right to move on to a new task without worrying about the risk of the previous one.
2. STRONGER CONNECTION BETWEEN EMPLOYEES
Poor communication is often to blame for the failure of a business, and it’s no coincidence that budgeting is actually a form of communication. Your budget clearly outlines what your business is focusing on as well as which department is accountable for which responsibilities. Anyone who is unsure of what their company values merely needs to consult the budget to see where most of the money is going.
At first glance, this seems like it would cause certain employees to become unmotivated after realizing that their department isn’t receiving the financial resources they believe they deserve. But it turns out that making everyone aware of specific expenses strengthens their connection with one another. Rather than becoming resentful, employees will devote more effort towards responsibilities that contribute to the department the company is spending the most money on.
3. FINANCIAL DECISIONS ARE NO LONGER A HEADACHE
Your budget should be realistic, based on your company’s financials from the past season. Even the most detailed budget won’t get you any closer to your goals if your numbers aren’t practical. But too much rigidity leaves no room for flexibility, possibly preventing you from neutralizing unforeseen expenses that might arise during this fiscal quarter or the entire year. So instead of allocating every penny of your marketing budget to a specific expense, leave a portion of it to the side for future opportunities that need to be confronted immediately.
Leaving room for flexibility and setting realistic numbers makes the future increasingly clear, removing a massive amount of stress that would otherwise build up and endanger productivity. You don’t have to worry about what you’ll do if your restaurant’s freezer breaks or the price of a key ingredient rises significantly six months from now. And the more conservative your projections are, the more likely you are to end up with more money than you originally planned for.
4. BUSINESS FUNDING IS WITHIN REACH
People who are skeptical about small business loans tend to subscribe to the notion that only certain types of businesses get approved for them. They are both right and wrong. Almost any type of business can get approved but virtually all borrowers have one thing in common: They regularly stay on top of their budgets. Your chances of approval for small business loans like working capital loans or merchant cash advance loans are much greater if you know how much money you spend on important expenses like payroll on a weekly and/or monthly basis.
You’ve probably noticed that business financing has changed dramatically as of late, making unsecured business loans available to more than just wealthy applicants with perfect credit scores. How are all of these smaller businesses getting approved? By showing their business lender that they know how fluctuations in cash flow impact their budget in addition to what kind of budget they will need to maintain in order to repay their debt without damaging profit margins. Such applicants get approved because forward-thinking business lenders have found that financial awareness is a surprisingly accurate way to judge someone’s ability to pay off debt. It’s not the finances themselves but the fact that the applicant is aware of them that makes or breaks a small business loan application.
MINOR STRESS, MAJOR REWARDS
A common mistake for small businesses is setting a budget but neglecting it until the end of the quarter due to stress. This habit is bound to come to an end if more business owners knew that revisiting and updating their budgets every month will just about solidify their eligibility for a small business loan. It doesn’t matter what industry you are in or if your slow season is particularly hazardous. The process of consistent budgeting is practice for carrying out an investment and paying off the debt little by little. If you can bring your budget back on pace when things go astray (as they always do), you can pay off a small business loan while simultaneously running your day-to-day operations smoothly.