Five out of seven small businesses close in the first year. Avoid these four budgeting mistakes or your company could be next

Simangele Mzizi, Fsp Business, 19 Jan. 2015

Tags: budgets, budgeting, budgeting mistakes, budgeting mistakes to avoid, company budgets

If your business is still thriving, congratulations! But this doesn’t mean you can rest on your laurels – which is what some business owners do.

The Department of Trade and Industry’s (DTI) stats show many businesses close in the first year.


They make mistakes in areas like their budgets which leads to all sorts of financial problems.

We don’t want you to fall into the same trap.

That’s why today, we’re revealing four budgeting mistakes you must avoid at all costs. Find out what they are so you can avoid business closure.

Four budgeting mistakes you must avoid

1. Being inconsistent with the tools you use to budget
You must choose one budgeting tool and be consistent.
In this article, we explain there’s no one-size-fits-all budgeting solution.
Some business owners prefer pen and paper, some feel comfortable with spreadsheets, and others prefer finance software packages. Find what works for you and your business and stick to it.
That said, we strongly recommend you use the Master Budget Series. You’ll never go wrong with it. It contains ten budget templates you can customise for your business. And shows you how to create your budgets so they interlink and work together.
2. Ignoring important details
Your budget must be thorough. You mustn’t just budget for the big stuff, says
“For you to get the most out of your budget, it has to be all inclusive. Sources of income are obvious but expenses can mount up surreptitiously leaving you scrambling through your receipts box trying to find out what you spent all your money on,” says the site.
Make sure you include everything from big costs, like payroll, to small things, like your office supplies.

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Amazingly simple way to manage your financials, thanks to the Master Budget Series

When new expenses arise, no one could have imagined they would be a source of so many serious problems for your business cash flow.

Even the slightest discrepancy in your financial budget can result in you not knowing whether your business is over performing or underperforming.

This is why you need a solid financial budget for your business.

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3. Not having an emergency fund
According to Standard Bank’s BizConnect portal, running a business with limited funds from month to month isn’t only stressful, it also means you’re one (even small) emergency away from bankruptcy.
That’s why it’s important to include an emergency fund in your budget. It will help you deal with any unexpected expenses.
The site says while creating this fund could mean reducing your profits (or even your salary), this resource could be the difference between success and failure.
#4: Forgetting about the taxman’s portion
Not only will this get you into financial trouble, it will get you into legal trouble too.
SARS doesn’t tolerate non-compliance. If you don’t pay tax, it will charge you penalties of up to 200%. You could even end up in jail.
According to experts behind the Practical Vat Loose Leaf Service, more than 250 SA vendors are currently serving jail time for disobeying Vat law.
So make sure you always include SARS’ portion in your budget.
There you have it: Avoid these four budgeting mistakes and you won’t face crippling financial losses or shut down.
PS: For more information on company budgets, check out the Master Budget Series. It has everything you need to know.

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