For most small business owners in Australia, budgeting may seem a boring task, but it is an important activity that you need to consider ensuring your business’ long-term success. Here are five of the best methods you can do to create a small business budget.
- Adapt a Smarter Money Management
Based on the found of Boost Juice, Janine Allis, it is essential for any business owner in Australia to adapt a smarter money management that will enable them to grow their business effectively. That is why you need to be more vigilant on your expense record and always be on top of your expenses.
You always need to check your monthly expenses vs. your monthly sales and determine which of these areas of your business has the most expenses.
If you’re going to look at your monthly sales and expenses, you will have an overview on which of the months you are strongest and which ones are your weakest, so this will give you an idea when you have the highest costs.
Here is a breakdown of these factors:
- Your monthly office expenses that will include computer devices and fixtures
- Recurring expenses which include your monthly utilities, rent, and other costs
- Your labor costs for both your office staff and outsourced personnel
After you have subtracted your monthly revenue from all your expenses, you will also need to compare the figures to your financial goals. This will give you a clear picture of your finances, and you can easily determine if you’re still on track or you need to cut back on your expenses.
If you’re still starting out with your small business in Australia, then you’ll need to make realistic estimates or seek the help of financial adviser that has in-depth knowledge in budgeting especially for business owners in AU.
You also need to do your own research and find out if other businesses within your market or niche have the same typical costs and revenues.
Don’t ever resort to guessing and make an unrealistic budget for your business. This will only lead you to poor estimates, and that mistake might have direct consequences for your small business in Australia.
- Determine Where Your Money is Coming From
If you want to be successful in budgeting, you’ll need to know where your money is coming from, and this can be achieved through proper organization and by breaking down your income into two streams.
- Government grant (one-offs)
- Income from your business or recurring income
Therefore, it’s essential that you take a small business loan AU, but it’s vital that you also add the repayments on your expenses list.
The chart focuses on separating your variable costs like your office staff’s wages, office supplies and other marketing expenditure minus your fixed costs like insurance and rental expense of your office.
- Knowing Variable and Fixed Costs
For you to determine the fixed and variable costs of your small business, you must list down all your expenses and produce a monthly and annual table similar to the chart below:
Once you have created a chart, you can readily customize it based on what your expenses are, and you now easily determine your real profit.
- You’ll Need to Pinpoint your Expected Profits During Financial Year
According to Jessica May, founder, and CEO of Enabled Employment, knowing the total costs and profits of your business is the key to your success in Australia.
Hence, you’ll need to project at least six months ahead using any tools at your disposal like spreadsheets that have the capability to automatically calculate the total costs vs. your profits at the end of the year. For this purpose, you may need to hire a freelance CFO to aid you with this particular task.
So, for small business owners in AU who wants to effectively manage their expenses, they must subtract the total yearly cost of their expenses vs. their total yearly income.
This should be done so you can effectively and properly create a budget for your business and ensure that your income will always be on top of your expenses.
Therefore, having an adequate budget will always help you improve your finances, and you’ll be able to identify the biggest costs and revenues.
That is why it is highly recommended that you establish a safety margin of least 10 to 20% around your revenues, so you’ll have a buffer in case something happens in the future.
- Keep an Eye on Your Budget
Another thing to consider in your small business is to always keep an eye on your budget and update it regularly. As a matter of fact, you’ll need to do this every month, especially if you’re still starting out with your small business in Australia.
The key here is a well-planned budget that is ideal for your business because this will allow pinpointing where exactly is your money going and how you can limit your expenses. So, at the end of the day, you have achieved your financial goals.
This, in turn, will help you grow your business, and you’ll also have extra funds for other expansions.
However, if you want to take out an unsecured small business loan in Australia, then it’s essential that you talk to our financial adviser because we can help you take out a business loan that is just right for your needs.