Use these three tips to develop a dynamic budget that will keep you on track all year long

Simangele Mzizi, Fsp Business, 10 Oct. 2014

Tags: company budgets, budgets, budgeting

You can’t run your business successfully without a budget.

Not only do you need this all-important tool to manage and control your company’s finances, but you need it to determine whether your profit goals are within reach.

But, according to Caron Beesley, a small business owner and writer, many business owners set budgets at the beginning of the year and then file them away until the year-end rolls around once more.

And this is where the problem lies: Your business isn’t static and your budget shouldn’t be either.

That’s why she recommends you use these three tips to develop a dynamic budget that will keep you on track all year long.

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Develop a dynamic budget using these three tips

Tip #1: Update your budget monthly
If your budget is going to work for you, revisit it on a monthly basis with your management team and update it based on your business’ performance and expenses for the prior month, says Beesley.
Take a look at your sales forecast and ask yourself if there are any changes to your budget to cover additional inventory or staffing needs?
In addition, look at your expenses and ask yourself if they’re as projected, or do you need to cut back in certain areas to stay on track?
Tip #2: Make changes that can have a positive impact
Based on your monthly review, make changes to your budget and then wait to see what impact these have on your income and profits by month and by year.
Beesley says, if, for example, you’re under-investing in marketing, adjust your budget and see what happens to your pipeline next month or over a six-month period. In your next review cycle, look to see if you’re getting a good return on marketing rands spent per sales lead. Then use this information to inform future planning decisions about where it’s best to allocate your costs.
Tip #3: Respond to unexpected changes
Finally, Beesley says, use your budget to adjust to the unexpected.
If, for example, an important client cuts their own budget and reduces the amount of business they do with you, take a look at your budget and how this reduction in revenue affects your cash flow and for how long. Work out how long it will take to find a new client to replace that important revenue source and what it will cost you in terms of marketing or hiring costs to help you uncover new business.
Remember, your business is never static and your budget shouldn’t be either. So use these three tips to develop a dynamic budget that will keep you on track all year long.
PS: For more budget tips, tricks, templates and so much more, check out the Master Budget Series. It has everything you need to know about company budgets.

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