If you haven’t already, it’s time to prepare your business’ 2020 budget. Having a budget can help you anticipate cash inflows and outflows, prepare for tax obligations, identify financing needs and explore growth opportunities. According to the Small Business Administration, half of all small businesses fail within the first five years. Smart budgeting now can help your business succeed and grow.
Not sure how to get started? Here are a few budgeting tips to help your business succeed.
- Understand Your Sales Cycle
- Plan For Unexpected Expenses
- Get Financial Advice From a CPA
- Apply for Financing Sooner Than Later
- Check Your Budget Regularly
Tip 1: Understand your sales cycle
If your company has an off-season, you will need to be prepared for inconsistent revenue and cash flow. The first thing you need to do is identify where your business stands financially at the end of the year. This will help you get a better understanding of what your profit, revenue, and savings are.
Tip 2: Plan for unexpected expenses
Every business is going to have unexpected expenses come up. Be prepared by having an emergency fund. Financial advisors recommend that emergency funds should cover expenses for three to six months. The good news is that you don’t have to fund your emergency account all at once, you can build it up a little at a time. Your emergency fund will prepare you for unexpected setbacks. Your emergency fund savings can even be used when business opportunities come up.
Tip 3: Get financial advice from a CPA
Getting a second opinion from an expert such as a Certified Public Accountant (CPA) is a good idea because they can help you develop a financial plan that‘s tailored to your unique business needs. They can also help to keep you accountable throughout the year.
Tip 4: Apply for financing sooner than later
A big part of your business’ success is having quality equipment that gets the job done efficiently. With equipment financing, it will be easy to afford the equipment your business needs to grow in 2020. Acquiring equipment through financing breaks down the cost into affordable monthly payments, making it easier to get exactly what you need.
Use a financing calculator to project your monthly equipment costs, tax savings, and breakeven point. The breakeven calculation gives you insight into how many jobs you need to do for the equipment to pay for itself based on net revenue per unit. Understanding expected net revenue will help you create a realistic budget and understand how much you can comfortably invest in a new piece of equipment.
Tip 5: Check your budget regularly
Once you’ve created a strong budget, revisit your budget regularly to identify what you need to change or keep doing. Having a better understanding of your budget can enhance your financial decision-making.
Start Your Budget
Opportunities for growth are everywhere, but in order to take advantage of them, you’ll need to start with a solid budget. Start with the above tips and you will be on the right track to success.