Tips on budgeting and managing cashflow

Working with well-planned budgets is an incredibly important step in managing and growing a successful business and making sure your finances stay stable.  

Dealing with the twists and turns of managing money is a normal part of running a business. It can be hard work. It is much easier when you’ve got a budget to track your performance and spending.  
 
Our top tips are: 

• Get to know your numbers (income, costs, etc.) 
  
• Plan for the best and worst cashflow scenarios 
• Set key metrics to measure spending, cashflow and progress 
• Track your performance over time 
• Regularly review your spending and look for ways to save 
• Research and trial things that can reduce wasteful spending
  

 

Creating budgets isn’t fun, and that’s okay!

We understand putting together data and messing around with spreadsheets to create budgets isn’t everyone’s favourite thing.

The Preston Corporate Accounting team froths for them. That’s because we’re accounting and bookkeeping nerds! Excel spreadsheets bring us joy and excitement…and we know we’re not normal.  

​Having a budget is empowering. It can give you the knowledge and insight you need to increase your profit, reduce wasteful spending and drive your business.   ​

Get to know your numbers

When setting up a budget, whether for the whole business or for a project, you need good numbers. 

You want to know what money is coming in and what money is going out. This includes income streams, staff expenses, overheads, taxes and fees, and general spending. It gives you a good baseline and foundation to work and grow from.  

You need at least ballpark figures, but we recommend you take time to look through your accounts to dig out accurate figures, so you’re not guessing. It may be time-consuming but very much worth it.

​ You will want a budget that tells you: 

• The costs to run the business 
• The profit from your activities  

• How much to invest further in the business 
• How much you can pay yourself/shareholders 
• What you need to maintain a long-term venture/project 

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Set your budget and track it over time

Once you have baseline costs, you have the information to make better plans.

​Your baseline cost is your starting point, but don’t forget to include room for contingencies. What if the projected expenses overrun next month? What if the cost of raw materials balloon? What if you need more staff for the work? 

​Decide on a clear budget and set your accounting/ bookkeeping system to track spending against this budget. Working with programs like Xero makes this much easier and we can help you with this.  
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Keep a close eye on budgets and project cashflow 

Your budget should be a living document. You should aim to stay within the initial costs.  Price changes, inflation, availability and other factors can affect spending and that’s okay! 

Budgets aren’t a ‘set and forget’ kind of thing. You want to keep tracking how you’re performing against your budget and how your cashflow is going.
  
Understanding the performance of your business in real-time will help you avoid overspending or running out of cash. It also shows you your gaps and your opportunities.  

For example, you may find that buying certain software costs a few hundred dollars but saves you hours in staff time that can now be redirected to other profit-growing activities.  
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Keep working to maintain a positive cashflow

Balancing the cashflow of a business or project often isn’t easy. But it helps you find those issues in your income and spending. When you find those issues, make sure you act promptly.  
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You never want to run a business or project with your fingers crossed because it does not always work out well in the end.  

You always want to be proactive with your cashflow and stop issues as soon as they appear.  
Knowing your budget and your performance gives you more flexibility and the ability to adapt when new things come up.  

Lots of businesses fold because they didn’t track their budget and didn’t understand how they needed to shift and change. Your budget sets you up to win.  

A few key things to think about: 

• Set yourself some key metrics to measure spending, cashflow and progress 
• Prepare yourself for the best and the worst cashflow scenarios (hello COVID) 

• Research and trial things that can reduce wasteful spending 
• Lastly, regularly review your budget. There is no point having one if you don’t use it and it’s a powerful tool if you let it be. 

Whether you’re thinking about starting a business or already running one, we are here to support you with all your financial needs.  
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We can work with you to build solid, workable budgets that you can easily use and grow with. ​