How to budget and save money for small business?

 When a person starts a business, they keeps things like marketing and finding investors, clients, building website, registering the online presence of the business etc on the top. And, this good up to some point, but there is one thing that every business owner should keep on the top from the very beginning and this is business budget. Now the question arises, what is budget for small businesses?

 

What is Budget?

 

A budget is an estimation of revenue and expenses over a specified future of time. For a small company, there is need that the Budget should be re-evaluated on a periodic basis. Not only for businesses, but budget can be prepared for a person, a group of person, for a business, for government, etc. In simple words, we can define budget as a financial plan for defined period, generally for one year, but can be on monthly and quarterly basis.

How to make budget for small business?

It is quite difficult for a person to run any kind of businesses whether small or corporate one without any proper budget. Since small companies generally runs out of funds and capitals, the need for a proper budget increase for them. Budget gives the overview of the business finance. It helps the company get the estimate about the expenses they should invest and the revenue they generate. In simple words, budget is a blue print that outlines the key information regarding the present condition of the company’s finance that includes both the income as well as the expenses and help them achieve the required financial goal as well as the organizational goal.

Every company whether small or the corporate requires to have a proper budget as they plays a major role in maintaining the financial condition of the business sound. A proper budget helps the company in making sound finance related decisions, identify the space where they can cut their expenses and grow their revenue, and request for more funding in order to grow the business.

How to make proper budget and save money for small businesses

Following are the four simple steps for small businesses for making a proper budget:

Capital budget planning

Capital is basic necessity for every business. Since it is most crucial factor for a company; there is need for making budget of capital as well.  Capital budgeting is method to estimate the cash-flow in business.

Basically capital budgeting is a planning for business activity that includes all the actions involving cash inflow and out flow. Capital budgeting is a process which analyses the investments made in business. With the help of capital planning, company get the estimate of the investment made in fixed assets and other assets and the estimated revenue both in long term as well as short term.

There are several methods for capital budgeting and these includes discount cash flow, payback, and throughout analyses. Businesses can apply any of the above mentioned method as per their requirement.

Cost budgeting

Cost budget includes expanses utilized in making the final product. It is very important for manufacturing companies to decide the final cost of the product. With the help of cost budgeting, the company gets the estimate of the cost required in manufacturing the product. Thus allowing the company to decide the cost for the product after keeping the profit.

Also, the cost budgeting helps the company to identify the spaces where they can cut the cost of the product and maximize their revenue.

Company can reduce the cost of the product by cutting their expenses in purchasing low price raw material, low price labour work, cutting down the transport cost and many more. With these minor cost reduction, company can decrease the final MRP of the product and increase their revenues.

Make goal for sales

For both the small as well as the corporate businesses, there is need for financial goal in order to survive and get success in the competitive market. The financial goal for any company includes target sales volume. When the company mention the target sales for a particular financial year in their budget, they get the goal to achieve and thus will work hard to make the aim possible.  

Budgeting for administrative expenses

Administrative budget is basically a detailed and official plan for upcoming financial year for a company. It includes all the expenses (Like rent, consulting expenses, salary of the staff, depreciation on assets, insurance premium, legal bill, other supplies, etc). Making budget of all the administrative cost helps the company identify where the company is spending more and which part of the requires more investment. It helps them identify the scope where they can cut their expenses and also identify the space where there is need to invest more in order increase the revenue.  

How to save money for small business?

No matter, how good the company is performing, when there is no saving, the company will not survive in the market. In order to increase the income and the benefit from the company, there is need that they should cut down their expenses and focus on saving more without impacting the production and the revenue.

Following are some scope where a company can save more money:

Cut down the expenses:

When the expenses overcome the revenue, the company will go through loss. This is the reason why the company along with focusing on increasing the production and the revenue, should also make budget to reduce the unnecessary expenses. A company can increase their saving and reduce their expenses by purchasing raw material in bulk at lower prices, get raw material at discounted price, try purchasing raw material in season time when their cost is low, go for online purchase and beat the traditional prices, upgrade the technology to higher standard, and many more. A company can reduce their expenses by hiring more affordable labour, saving more money in transport, hiring affordable talent, go for passionate talent instead of the experienced one, and so on. 

Use low cost promotion and advertisement rather than traditional method

Promotion is essential for making the target audience know about your product and the company. But in initial time, when the capital is already limited, instead of heavy promotion, a company should go for affordable one.

There are several low cost promotional methods are available now and one of the best method is digital marketing. It require low cost and help you approach a larger volume of audience.

Paper less work

Going paper less will not only help the company cut down their expenses but will also help them contribute in green nation. Going digital and using digital methods for billing, accounting, and amny more will help the company save money in papers and contributing in keeping the environment green.

Cut down in wastage

Avoid wastages! This might sound simple, but in actual carries a high weightage. A company can save a big amount by avoiding wastages in production, and many more processes and help in saving resources as well. 

Main idea

For a small business, budgeting and saving both are crucial. I hope this guide help you save more money and increase your revenue from your business.