How to create a budget - and stick to it!

Creating a budget for your business is a crucial step in managing your practice's finances effectively. However, sticking to the budget can be a challenge. Here's a step-by-step guide to help you create a business budget and stay on track:

Gather Financial Information

• Collect your historical financial data – such as income statements, balance sheets, and cash flow statements. This data will allow you to understand your past revenue and expenses.
• Identify all sources of income in your business such as; sales, loans, and any other revenue streams.

Define your goals

• Determine your financial goals for the financial period. Are you looking to increase revenue, reduce costs, or save?

Create a Budget

• Start by categorizing your expenses into fixed expenses (for example; rent, professional membership fees, etc.) and variable expenses (for example; marketing, utilities, CPD courses).
• Estimate expenses for each category based on historical prices and future projections.
• Be realistic but also conservative when estimating expenses to avoid overspending.

Forecast your Income

• Estimate your sales revenue for the financial period, remember to take into account factors such as seasonal periods.
• Consider different scenarios, including best-case and worst-case scenarios, to plan for contingencies.

Monitor Cash Flow

• Monitor your cash flow by tracking when money comes in and goes out. This is important to make sure you have enough cash to cover expenses.
• Set aside money every month to build a cash reserve for unexpected expenses, dips in cash flow, and emergencies.

Budget for Bigger Expenses

• Include in your budget allocations for bigger expenses, such as buying new furniture for your clinic, buying new computer equipment, etc.
• Prioritise these bigger expenses based on their importance to you and your clients.

Review and Adjust Regularly

• A business budget should not be static. Review your budget regularly, for example monthly or quarterly.
• Adjust your budget as necessary to reflect changes in your business, such as unexpected expenses or changes in revenue.

Identify Areas of Overspending

• Review your budget regularly to identify areas where you are overspending or not meeting your revenue targets.
• Take action where necessary – such as cutting unnecessary expenses or adjusting your sales and marketing strategies.

Use accounting software

• Consider using accounting software that will record your income and expenses, monitor cash flow, and generate reports more efficiently.

Involve your Team

• If you have a team working with you ensure that they are aware of your budget and understand their roles in adhering to it.
• Encourage a culture of cost-consciousness and responsibility throughout the business.

Get Professional Help

• If you are unsure about creating or managing a budget consider getting professional help from a bookkeeper or accountant.

Stay Disciplined

• Sticking to the budget requires discipline and commitment. Avoid making impulsive financial decisions that could have a negative effect on your budgeting efforts.

Remember that creating and sticking to a budget is an ongoing process. It requires diligence, flexibility, and adaptability to changing circumstances. By regularly monitoring your financial performance and making adjustments as needed, you can better control your business’s finances and work towards achieving your financial goals.

Do you need support setting and managing a budget? This is something that I can help you with! Contact me so that we can discuss how I can support you and your business.