Budget Basics for SMEs – 6 Golden Tips

Published, 5 years ago

A Matter of Good Business Practice

Good business practice suggests that having targets and clear goals for a business, will help to focus the minds of both owners and their staff on what needs to be delivered in order to achieve those targets and goals over a period of time.

Therefore, it would be expected that SMEs would view preparation of an annual budget as a key part of managing and growing their business.

Unfortunately our experience tells us that many SMEs for a variety of reasons do not prepare budgets at all, or alternatively only finalise them part way through their financial year. At this point they will often be so far off the budget results that they ignore it or feel so drained by the whole experience that the idea of future budgets is already devalued in their minds.

A Growth Accelerator

We believe that a budget can be a vital growth accelerator tool for a business as, with the right process a budget can highlight issues or opportunities against which action can be taken, before the start of the new financial year.

Hence, the budget can be set with realistic goals and targets for the new financial year as these issues are already resolved or in the process of being resolved.

Also having a budget against which month by month activity is reviewed or benchmarked, means that poor marketing or sales performance can be reviewed or spend controlled. Existing leads can be reactivated to try and deliver new business targets, delayed Client projects can be followed up and recruitment can be delayed based upon current activity requirements.

Sakura’s 6 Golden Budgeting Tips for SMEs’

1. If you want to drive your business growth, then prepare a budget for your upcoming financial year.

2. Ensure that the budget has been finalised prior to the start of the financial year concerned.

3. Prepare the budget on a month by month basis as this is typically how businesses review their actual activity.

4. Base the budget on your current activity plus your expected or required growth, based on already known or expected changes, for example new client wins and new services etc.

5. Ensure that you add in the right costs. (For example, if you have budgeted in new client wins then carefully consider if the current level of staff will be able to support those new clients or add in the cost for a new employee).

6. Take action. There are many reasons why there may be variance away from the budget figures, however when reviewing actual activity against your budget, movements should be understood and should result in action being taken within the business i.e. reductions in spend, contacting leads to try and generate new clients for new business targets, communicating with clients where projects appear to have been delayed with the aim of helping to get these delivered.

Preparing a budget is not a ‘finance’ task, as a realistic and achievable budget can only be created with the involvement of the individuals in the business who know the customers, are involved in the sales or marketing teams, manage the delivery of client projects, control overhead expenditure etc. Therefore, here at Sakura we work with the business to help drive and deliver a budget.

If you want us to help with your budget process, or need help with getting started with your own budget then please contact Damian Connolly via email: damian@sakurabusiness.co.uk or call 0207 952 1230.

You can also tweet us your questions: @sakurabusiness

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