In 2014 99.3% of all private sector businesses were made up of SMEs that employed 15.2 million people. You can see from these statistics how vital the survival of SMEs is to the UK economy. That makes the figures reported by The Telegraph at the end of 2014 even more disturbing. Those figures indicated that half of all SMEs in the UK fail within the first five years. If you own an SME you don’t want to be part of the 50%. Making the most of your budget is an essential part of survival.
One of the most important aspects of optimizing your budget is knowing what your budget is in the first place. This may seem like a simple concept but it’s amazing how many SMEs just don’t plan their budgets. They use excuses such as a lack of available time or manpower. Don’t forget, as a small business owner, planning your budget doesn’t just help you to manage it; it helps you with securing loans and investment. It also helps you with limiting your expenditure which you can do more easily if you know the budget you’re working with.
Planning your budget
Budget planning isn’t as time consuming as you might think; remember to keep it simple. You’ll find the best way to start planning your budget is to take a look at last year’s accounts.
You can work out your overheads or operating costs by doing this. These costs tend to be consistent. Once you’ve done this take a look at your direct costs and estimate what your gross profit and gross profit margin will be, for each of your products. This includes producing a sales forecast, without which it’s very difficult to successfully manage your budget. Remember, this forecast needs to be based on accurate data such as previous sales figures, seasonal fluctuations and market trends. You can’t just pluck a random figure out of the air.
Having done all of this you’ll be able to see an approximation of what your earnings are expected to be compared with your expenditure.
Don’t make matters complicated, it’s can be as simple as noting where you expect to be financially at the end of the next fiscal year. If you’re having difficulty planning your budget it may be worth investing in a simple software package to help. You’ll benefit from the investment in the long run.
Limiting your expenditure
Once you have planned your budget you should know your expenditure limits. This is a vital aspect in the making the most of any business budget. Continuing financial waste is a sure fire way of putting any business at risk of failure. It’s vital for SMEs to spend wisely. Much like personal shopping, there is plenty of scope for small business owners to utilise sites such as www.vouchacodes.co.uk to secure deals and discounts on items that are essential to the running of the business. It’s a method of budget optimization that is overlooked by many.
You don’t want your SME to be one of the 50% that fail. That’s why it’s vital you plan your budget effectively. Once you know the budget you are working with, don’t be afraid to use all available options to maximise its potential.