It is essential to chalk down a realistic budget for your business
for it to function smoothly. A well-planned yearly budget is the best
tool to forecast the business turnover and it also equips you for
unpredictable business emergencies. It helps you set yearly targets
while organizing sales, purchase and capital more efficiently. Here
are a few steps to help you plan your budget better in order to
optimize the usage of your existing resources.
1. List your revenue streams: The first and
most important step in planning your business strategy and budget is
to figure out how much money your business makes on a monthly basis.
Start with your sales by jotting down a profit and loss report. Then
add other revenue sources like investment returns, and revenue
received from infrastructure rental, if any. This helps in planning
business operations like inventory purchase, employee salaries
disbursal; and office expenses like rentals, utility bills and vendor
payments. If you have more revenue rolling in than your expenses, then
you are making profits. If your expenditure is more than your profits,
then your business is making a loss.
Some ways you can fix this:
- Re-structure your investment strategy.
- Pay debts in time to avoid heavy penalties.
- Maintain financial liquidity, so you are fully equipped to run
your business. If unable to do so, you could also go for a collateral-free
2. Forecast expected expenses: Besides evaluating
your business cash flow, it is also important to write down the fixed
monthly expenses that your business would bear. You could review your
bank statements to identify your regular bills and the money they cost
every month. It could also include workplace maintenance expenses like
re-furbishing, AC maintenance, and lighting fixtures. Money needed for
promotions and events should also be added to the budget.
3. Add Variable Costs: There are many expenses that
are not fixed and these could be adjusted according to a company’s
financial health. You could increase the funds for the same to expand
your business faster, when the business does better than your
expectation. However, the dynamics of the SME segment requires
entrepreneurs to grab every growth opportunity without wasting time.
It’s always a good idea to approach other sources of business funding
like fintech companies that offer quick
unsecured SME business loans in India, instead of relying on
4.Cash liquidity management: To run an SME smoothly,
it is important to have consistent cash flow. It can be done by
striking a balance between investments and cash reserves in business
accounts for monthly expenditure.
5. Review your budget plan: Budget planning works
well with SMEs when they are diligently followed. Often, these budget
plans fail because budget sheets are just pinned to a board or are
lying in a drawer. Budget plans need to be reviewed and revised every
month to keep the objectives and targets in mind while performing the
These budget strategies will help you organize your finances, manage
cash flow and foresee the growth of your business.