Resetting your business’s budget in Q1 is a vital task that can help you stay on track with your financial goals and make the most of your resources. Estimating and comparing expenditures to revenue is crucial because it enables business owners to assess their financial capacity and decide whether to invest in operations or grow the company. Without a budget or strategy, a company faces the danger of overspending or underspending in order to compete and expand.
9 simple steps to set your business finances up for success in Q1
1. Review your current budget
Before you make any changes to your budget, take a look at how you’re currently spending your money. It will help to organize your expenses into categories such as sales, marketing, labor, etc. Review your income and expenses for the past year and a breakdown of the past few months to see where you’re spending the most money. Are there any areas where you’re overspending? Are there any expenses that you can cut back on?
2. Set financial goals
With an understanding of your current financial situation, you’ll want to create some goals for the new quarter. Think about the financial goals you have for Q1 and for the year. Do you want to focus on increasing profits, getting rid of debt, or putting money into new technology or equipment? It is much simpler to create a strategy that supports your goals once you have a clear outline of what those expectations are.
3. Measure your team’s needs and cut any unnecessary expenses
There are some business expenses that are mandatory for many (if not all) businesses, such as credit card processing fees, certain legal fees, education and training expenses, etc. There are also certain tools and resources that your team needs to access to succeed. Some of these expenses may be unnecessary and some of them may grant your team the luxury of convenience or optimization.
Weigh the cost and the benefit of these tools to determine if they are a financial hindrance or a worthwhile expense that helps to increase productivity and make your team’s work a little easier. There may also be less expensive alternatives to the pricey tools you’re already using. This analysis is the perfect time to explore budget-friendly options that will put a little dough back into your business.
4. Consider your fixed expenses
Even if you have fixed costs, such as rent or a contractual agreement with a postal service, there are options to reduce these expenses. You may consider relocating to an area with more affordable rent, looking for lower insurance premiums, or negotiating shipping rates with carriers. Although these efforts may not result in lowered costs, it’s important to remember that you do have options. If any of your fixed expenses are breaking the bank, consider alternatives.
For more on reducing delivery expenses, check out our top 6 ways to reduce eCommerce costs.
5. Determine your projected income and strive to increase it
There are a few ways to determine your projected income: past income, your growth rate, and market research. Even though your income may vary from quarter to quarter, you probably have a good idea of your minimum profit each quarter. If your business has been growing by, say, 10% percent, you can use this rate to estimate your projected income. Finally, take a look at industry trends. If your industry is expected to grow, you can take this into account as well.
If you’re struggling to save money or pay off debt, this could involve raising prices, acquiring new customers, or expanding your product or service offerings. Of course, this will require a budget of its own, but even a modest increase in your income can have a significant impact on your capacity to meet your financial objectives.
6. Automate your finances
To make sure that you’re staying on top of your business’s finances, automate as much as possible by setting up automatic payments for bills and invoices. Not only will this help you avoid any late fees, but it will also help you stay organized. Consider using a software program that tracks your income and expenses. This will make it easier to see where your money is going.
7. Account for unexpected costs with contingency funds or a savings
All the planning in the world cannot predict out-of-the-blue expenses, such as equipment failure or supplier cost increases. Even if you’re in debt, strive to set aside a percentage of your profits each month in contingency funds or a savings account to cover these unexpected costs.
The encouraging thing about savings is that once you get to a point where you have enough saved, you can treat your team to an end-of-the-year bonus, splurge on something special for your customers, or focus on renovations. A savings account can either save you from a pricey unexpected cost or go towards something to improve team morale or business operations!
8. Make a new budget
Using your financial goals and your spending habits, it’s time to create a new budget for Q1. List your fixed expenses first, followed by variable expenses. Allocate a certain amount of money to each category and make sure that your total expenses don’t exceed your projected income. Keep your financial goals in mind as you create your new budget.
9. Monitor your progress
As you strive to reach your financial goals, it’s critical to monitor your progress. Make sure you’re on track by keeping an eye on spending. You may need to make modifications to your budget if you’re having difficulty staying within limitations, but knowing your category allotments will help you adjust as needed.
Setting aside time to strategize your spending allows you to make wise judgments about how to distribute funds. You can make sure you’re making the most of your resources and driving your business in the right direction by analyzing your existing budget, creating goals, minimizing needless spending, boosting your income, automating your finances, and tracking your progress. Raise your chances of success by taking the time to prepare a budget and routinely monitor it.
Get the support you need to succeed
Seeking outside business support is an affordable way to reach your goals and scale your business. Our on-demand teams provide 24/7 support to help your business grow, no matter how big or small you currently are. With simple, month-to-month pricing, we provide a variety of different services designed to scale your business without breaking the bank. Check out our support solutions to see how Influx can help you grow!