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Reasons for Small Business Budgeting
Reasons your Small Business should create a Budget...
1. Creates a spending plan for your company
Would you ever go somewhere new without planning where you were going first? No, probably not right? Think of a budget as a plan, it sets a path for you to follow so that you can reach your destination, which is financial confidence.
2. Gives your company control over its spending
For those companies who have a problem spending, a budget will help the company get back in control of its funds. You will learn how to control unnecessary buying and overspending.
3. Prepares your company for emergencies in the event of an unexpected downturn or change in conditions
There will be times when an emergency arises, catching you by complete surprise. A budget can be used to create emergency funds so you won’t be left wondering what to do when such an instance comes up.
4. Improves financial intelligence and leads to more sound financial decision making
A budget will help you to be more value and price conscious when investing and making plans to expand the firm. It will also help you pay more attention to how you consume resources in the company such as labour and overheads (stationary, electricity, rent etc).
5. Helps the firms manage its current and future Debt obligations
A budget can help the firm out of debt by controlling/monitoring credit card spend, eliminating non-essential company expenses and creating a debt repayment plan. Plus, once out of debt, you can continue using your budget plan to help keep out of debt.
6. Helps the firm save money so it can be re-invested back into the firm for further expansion
If you are looking to save money, a budget is the perfect tool to help. A budget can be used to save for goals, such as expansion into a new office, realisation of new services and product lines.
7. Sets the Priority for firms spending
With a budget in place the firms spending priorities become a lot clearer. IE; Its more obvious to see spending that has a higher value and hence higher rate financial return as compared to lower value expenditure activity.
8. Ensures all employees within the firm are “on the same page” with regards to planned and agreed expenditure
Budgets Plans created at a top down executive level and at a bottom up operational level can be set and adhered to by all employees. So everybody in the firm is “on the same page” with respect to what can be spent and more importantly limits on what should be spent. Also, provides employees with the opportunity to more clearly see where cost savings can be made, so the firm can come in under budget where possible.