Posted on 15/04/2016, 09:43
Owning a small business is not easy; having a good plan is a key requirement for success. Alongside your business plan, a well thought-through budget is a powerful tool.
A well-considered budget helps when making important decisions, and provides a baseline for determining whether a business is achieving its goals and objectives by providing a set of metrics to measure performance during the year. A budget helps businesses control expenses, manage inventory and cash flow, make key investment decisions, secure funding and attract investors / new partners.
Despite the important role a budget plays many SMEs don’t invest the time and effort to create and implement one. Some of the reasons business owners typically give for not having or using a formal budget include: “I don’t know how to”, “I don’t think it is a good use of my time”, “My business isn’t big enough” and “There’s no need – all the information is in my head.”
Here are 5 tips to help you put a budget in place:
Now look at your cost of sales, i.e the costs directly related to making a sale, and calculate your likely gross profit and gross profit margin. Gross profit is the difference between sales and the direct costs associated with sales and funds the business.
A working budget is one of a crucial set of tools in ensuring the success of your business. As Benjamin Franklin said:
“By failing to prepare, you are preparing to fail.”
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