BUDGETING FOR SMALL BUSINESSES: WHY, HOW AND WHEN?

It is a basic tenet of business - before you can make money you have to figure out how to spend it. Drawing up a budget is a key way to help you turn your dreams for business success into reality. Using this vital tool, you can track cash on hand, business expenses, and now much revenue you need to keep your business growing -- or at least afloat. It is true that budgets can be difficult to plan and maintain – unexpected events, cash flow problems, supply chain issues and more can all reap havoc with even the most thoroughly planned business budgets. However, Entrepreneurs who start without a plan spend more money. Your business is never static, and your budget shouldn’t be either. That is why we want to walk you through the 3 Basic questions involved in budgeting. Why, How and when. WHY: Budgets are enormously important to the operation of your business; not only do they help you manage your costs, but they also help you determine whether your profit goals are within reach and keep you on the right road from month-to-month. Simply put, a budget is a detailed plan of future receipts and expenditure. Think of a budget as a tool for control. Estimating and matching expenses to revenue (real or anticipated) is important because it helps small business owners to determine whether they have enough money to fund operations, expand the business and generate income for themselves. Without a budget, a business runs the risk of spending more money than it is taking in, or conversely, not spending enough money to grow the business and compete. WHEN: RIGHT NOW. Sure, Q1 is over and Q2 is almost halfway gone, but it is better late. Based on your monthly review, make changes to your budget and then wait to see what impact these have to your income and profits – by month and by year. Your budget will never be static or consistent — it will change and evolve along with your business, and you'll need to keep adjusting it based on your growth and profit patterns. HOW: With a business that is already up and running, you can make assumptions of future revenue based on recent trends in the business. If the business is a startup, you will have to make assumptions based on your geographic area, hours of operation and by researching other local businesses. Small business owners can often get a sense of what to expect by visiting other businesses that are for sale and asking questions about weekly revenue and traffic patterns. It is also key when drawing a budget to; Overestimate your expenses, Pay attention to your sales cycle and Plan for large purchases carefully and early FINAL NOTE: An up-to-date budget and data-driven financial projections are important components that help guide when to make large investments in your business. Still not sure how to prepare your budget? Email our knowledge help desk on knowledge@audeo.ng and we will send you a free template and even talk you through it.

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“The first rule of personal finance is that it's not personal and it's not financial. It's about your ability to make ten changes and not get too depressed over it."

James Altucher

Audeo was founded from a young auditor's dream to “provide a simple yet effective solution to all SME problems and build a stronger, more economically viable Africa on the solid base of Small to Medium Scale Enterprises.

The SME Champion & Co (trading as "Audeo") is a multi-disciplinary professional services Firm that provides back – office and decision support services to Startups, Small and Medium Scale Businesses in Nigeria. Using the information obtained through Management Accounting, we are able to proffer initiatives to improve efficiency, reduce costs and wastages, create capabilities and optimize capacity to our clients.

Our vision is to become the to-go firm for back-office and decision support services to start ups and small to medium scale businesses across Africa.

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