Even though it’s the most critical part of any business, setting a budget can be a challenge if you’re a small business owner.
Here are 5 common budgeting mistakes many small business owners make, and tips on how to avoid them.
1. No business strategy
Many new small business owners don’t have experience with budgeting or running a business, and they often set their budget without having a solid business plan in place. By having a short and long-term business strategy in place, you can set goals and plan for them.
2. Low selling prices
Small business owners are often tempted to sell their product or service at a price less than that of their competitors when they first enter the market. The theory is to attract new customers, but if your profit margin is low, then the loss is more.
3. Spending too much too soon
A mistake by many new small business owners is to spend money excessively as soon as they start receiving revenue. If expenditures are being tracked via an accounting system, you can identify what money is being spent, and once you track your spending, you can make sure you’re following your budget.
4. Underestimating the amount of tax payable
Unfortunately, there’s no way of getting around the need to pay tax; every business has to do it. But if you underestimate the amount of tax you need to pay, this will have disastrous consequences on your budget. Overestimating the amount of tax payable is much better than underestimating.
5. Mismanagement of the business
Not managing and organising a business will inevitably lead to failure. Disorganisation often leads to unforeseen expenses, and therefore less profit margin. Cash flow is a good indicator of what state your business is in; poor cash flow indicates that money coming in is less than the amount of money going out, and this needs to be addressed.
All these budgeting mistakes can be avoided by contacting a specialist business advisory service who can assist you in implementing a business strategy and provide expert accounting advice.
Quite simply, by contacting Propeller Advisory, a virtual bookkeeping, accounting and CFO firm based in Melbourne, you’ll be provided with the very best advice, without paying the normal extravagant costs usually associated with such a service.
So while Propeller Advisory assists you with your accounting and administrative needs, you can focus on growing your business.