financial goals

Accounting Business Financial Planning

Three Most Common Budgeting Errors

When it comes to creating a budget, it’s essential to estimate your spending as realistically as possible. Here are three budget-related errors commonly made by small businesses, and some tips for avoiding them.

  1. Not Setting Goals. It’s almost impossible to set spending priorities without clear goals for the coming year. It’s important to identify, in detail, your business and financial goals and what you want or need to achieve in your business.
  2. Underestimating Costs. Every business has ancillary or incidental costs that don’t always make it into the budget–for whatever reason. A good example of this is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget time and money needed to train staff or for equipment maintenance.
  3. Failing to Adjust Your Budget. Don’t be afraid to update your forecasted expenditures whenever new circumstances affect your business. Several times a year you should set aside time to compare budget estimates against the amount you actually spent, and then adjust your budget accordingly.

Call our office if you want to discuss setting up a budget to meet your business financial goals. We’re happy to help.

Accounting Business Financial Planning

Three Most Common Budgeting Errors

When it comes to creating a budget, it’s essential to estimate your spending as realistically as possible. Here are three budget-related errors commonly made by small businesses, and some tips for avoiding them.

  1. Not Setting Goals. It’s almost impossible to set spending priorities without clear goals for the coming year. It’s important to identify, in detail, your business and financial goals and what you want or need to achieve in your business.
  2. Underestimating Costs. Every business has ancillary or incidental costs that don’t always make it into the budget–for whatever reason. A good example of this is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget time and money needed to train staff or for equipment maintenance.
  3. Failing to Adjust Your Budget. Don’t be afraid to update your forecasted expenditures whenever new circumstances affect your business. Several times a year you should set aside time to compare budget estimates against the amount you actually spent, and then adjust your budget accordingly.

Call our office if you want to discuss setting up a budget to meet your business financial goals. We’re happy to help.

Accounting Business Quickbooks

Cash Management Tips for Small Businesses

Cash is the lifeblood of any small business. Here are some tips to help your business maintain a sufficient cash flow to meet its financial goals and run efficiently:

Toughen up your credit policies. Review the payment terms you offer to customers and tighten them up if slow payment is a problem area for your business. For instance, how long are customers given to pay? What action will be taken if a payment is missed? Be sure your credit terms are communicated effectively to customers before transactions are entered into.

Tip: Consider requiring advance payments – at least in part – for new customers.

 

Tip: For many businesses, a routine credit check should be performed before a sales or service transaction is entered into with a new customer.

Come up with a budget – and stick to it. Surprisingly, many small businesses do not engage in the budgeting process. A budget can be extremely effective in helping you keep track of whether cost- and revenue-related goals are being met. Depending on the size and complexity of the business, the budget process might be informal or formal, lengthy or simple. Projected revenues and expenses should be broken down by months.

Tip: If you don’t already do so, budget for next year’s revenues and expenses near the end of each year. Review budgeted to actual results monthly.

 

Tighten up billing. If collecting bills has become a problem for your business, you might want to consider increasing the intervals at which customers are billed–e.g., from three months to one month, or from one month to two weeks.

Tip: Review your accounts receivable weekly or even daily to make sure slow payers are not allowed to slide.

 

If you have questions regarding your company’s cash flow and credit/collection policies, give us a call. We can help.

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