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The road to business stability – nine tips for budgeting success

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Budgeting, in the current economic climate of looming interest rate rises and inflation, is pertinent to financial stability within your business. According to the MYOB Business Monitor for the April 2010 quarter, one-third of business owners only refer to their bank statement to track cash flow and develop their business budget. This means that one-third of Australian businesses aren’t honing their budgeting skills to the degree necessary for maximum business returns.

Money is a tricky asset, disappearing when you turn your back even for a second. Avoid unexplained income and expenditure with a strict budget and facilitate your business’ wealth so that you can reinvest in your biggest and most important asset – your business!

Here are nine tips to help you create a budget – and stick to it!

1. Your business on a blank sheet of paper

Take a blank sheet of paper and determine all the income and expenditure of your business. Brainstorm everything. Then input it into a spreadsheet so you can easily view and track incoming and outgoing money in the business.

2. Essentials and non-essentials

Determine the essentials and non-essentials of your business’ overheads. Look into cheaper alternatives for business non-essentials (such as those that don’t directly contribute to business operations) or cut them from the budget altogether.

3. Dreaming up goals

Create monetary goals. For example, one goal could be to cut spending by 10 per cent for any given month. However, make sure that your goals are challenging, yet achievable, to keep you motivated and that no goals conflict with one another.

4. Be realistic

Avoid creating a budget that is paper-thin. Don’t have all of your money accounted for. Budgets should be strict, yet allow for a degree of flexibility.

5. Breathing room

Ensure that your budget has room to breathe. Allow for unexpected expenses or cash emergencies within the budget.

6. No shame in asking for help

Seek assistance when needed. This may be in the form of accounting software (such as MYOB or Quicken) or advice from your accountant. Either will allow you to set up a realistic template for your business budget and train you to develop your own budgeting skills.

7. Know the principles

However, ensure that dependence on either is not too strong. Aim to understand the principles behind the advice so that you can develop a working knowledge of budgeting, including the construction and maintenance of your budget.

8. Look everywhere

Pull information on your financials from different sources to gain an accurate snapshot of your financial position (which will, in turn, provide for a more realistic budget). This means looking at bank statements, profit and loss statements, cash flow statements and balance sheets to gain an understanding of your financials.

9. Motivational rewards

Finally, ensure you reward yourself (and staff) when financial goals are achieved. Often, spending a small amount of money can prevent you from spending a lot further down the road of your budgeting.

So, if you’re looking to work on your business rather than being stuck in it, book in for a complimentary business assessment today with Switzer Business Coaching

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, July 30, 2010

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