For businesses on a budget, it’s not always best to be safeguarding money and never touching it. It’s about stretching your funds to cover day-to-day operations and getting each dollar to work for you.
What’s different between successful businesses and ones that fail is that successful ones work around their budget for as long as it takes for them to reach financial stability. Putting your money where it matters is simple when you as a business owner have these priorities in mind:
1. Early cash-burners
Getting into the game, your business could be running into a lot of startup expenses. Slow sales may lead to early losses, while business necessities could cost more than what you originally budgeted for.
It can be near impossible to predict the total impact these things will have without some operation time under your belt, so be prepared to cushion things financially early on.
2. Smarter investments
Just because you’re working with a limit, doesn’t mean you should avoid spending at all cost. Consider spending on the right things, at the right time and in proper amounts, things that will add value to your business. Consider the following:
- Order only the supplies or stock you need. Don’t be swayed by large discounts to encouraged you to buy more stock than you need. This just ties up your capital and if demand changes you could find yourself with a heap of leftover stock.
- Turn to technology for cost-efficiency. There are hundreds of different systems available to assist you improve your productivity and efficiency. These are a sound investment and will support the growth of your business for example cloud-based accounting software or social media for marketing alternatives.
- Do things yourself when you can. It won’t make sense for a business to invest too early in extended payroll or service fees when your sales can’t justify additional costs.
- Work from a low-lease or a convenient location like your home. Shelling out for a physical office isn’t always necessary for small businesses to become successful.
3. Profit-utilisation
Everyone knows how tempting it gets to spend hard-earned money on yourself or on new equipment. Regardless, try to avoid cashing out on trends or ‘success-markers’ (flashy signs, shiny cars, etc.) unless they make a big difference by improving your business’s productivity or operational capacity.
4. Unexpected growth dangers
The irony of growing your business too fast? You become more exposed to cash crunches. If you’re focusing too much on growing profits instead of controlling cash flow, you could be running your own business into bankruptcy.
Preparing a cash flow forecast is one of the most established ways to make sure you have a steady inflow of cash coming into your business. Once you know how fast you can replenish funds, it is easier to put together a strategic approach to business growth.
Learn more about business and cash flow management by using our Free and Easy Action Plan: “How to Forecast Cash Flow” to project the cash going in and out of your business, and the cash surplus (or deficit) that it can generate.