If you are a business owner in Sydney that’s generating income, you may find yourself falling into the habit of treating every dollar you earn as expendable income, leading to a unmanageable budget and financial issues down the track.
After establishing yourself and your business, it’s important to keep moving forward rather than backwards in regards to your finance and profitability. The best way to keep moving forward in the crowded market of Sydney is to budget well and make smart decisions with your businesses money. For this reason, we’ve put together a guide for Sydney business owners who are after some budgeting tips that will keep you in business.
Recognise Your Business Costs
Not all businesses have the same expenditure, although many share basic costs that you should be prioritised in order for a successful budget. These include:
Business Taxes and Licencing Fees
Supplies and Inventory
Trade Association Membership Fees
Paying Your Employees
Rent or Mortgage Repayments
These are just a few of the many things that most businesses have to prioritise in their budget. While you may not have these exact costs, it’s important to be aware of all of your basic costs that keep your business up and running before you expand your spending.
Log All Of Your Expenses In A Formatted Worksheet
While you may be a sensible spender with your own finances, trusting your ability to manage money in your head simply won’t cut it in the business world. Writing plans down on a piece of paper here or there can lead to scattered records that aren’t easily consolidated. Be sure to a keep a central worksheet which thoroughly documents your budget in an orderly manner. The most efficient and affordable solution is to prepare your own worksheet on a free program such as Microsoft Excel. Give yourself a clear picture of your total expenditure and your total earnings for each period to avoid spending money you don’t have and falling into debt.
Save Revenue For Unexpected Costs
Running a business can be unpredictable, running a business in Sydney can be even more so. As a business owner it’s vital to stay prepared for unforeseen circumstances that can affect your business. Whether it be government or council regulation or a personal issue, there can always be bumps in the road and it’s important to be ready to face these financial hardships. Many business owners set aside a small percentage of their profits for an emergency, saving more over time to be prepared for any case. By saving a small amount every week, you are eliminating the chance of falling into debt if an unforeseen problem arises and you have to borrow money with high interest rates.
Find Areas Of Your Business In Which You Can Cut Costs
An important trait to have as a successful business owner is to take an honest look at your business and find ways to cut costs to increase profitability. Until you are reaching higher levels of profitability, it’s important to put luxurious expenses to the side and focus on the core of your business.
Observe your business process, analysing your equipment usage and employee productivity and review their efficiency. You may find that certain equipment isn’t necessary for efficient process, or certain employees aren’t fulfilling their duties. It’s important to be honest with yourself and your business and make decisions that will keep you out of debt and moving forward.
Look for ways to recycle equipment that you would otherwise discard such as office paper. Make your employees accountable for their usage of costly items such as printing and set limits according to your budget.
Shop Around With Your Suppliers
In Sydney, prices for supplies can fluxuate quite often due to the competitive nature of the market. Avoid signing exclusive contracts with suppliers as it takes away your ability to shop around for the best deals, essentially costing you money. When you receive a quote from a supplier, don’t accept it right away, instead get several quotes and compare the market.
We recommend that you:
Start a bidding process with a supplier or
Set a date each year when you are able to review your contracts and decide whether or not you wish to continue business with your supplier.
By letting your supplier know that you aren’t afraid to take a better deal, they will become flexibile to your requirements if they want to keep you as a customer. If they sense that other suppliers want your business, their only option is to compete for your contract.
Stay On top Of Your Budget
It’s easy to write up a budget which leads to business savings and growth. What’s often not easy to do; is to stick to your budget. Once you have set your budget, you have to actively manage your spending to make sure that it aligns with it. Set a date each period for a financial review of your budget with the company of other stakeholders and consultants to evaluate your progress. By including others, you are leaving room for improvement through valued business advice and knowledge.
Generate Personal Income From Your Business
Many business owners see their business equity as their own personal finances. These owners often times don’t pay themselves a steady wage and instead use business money as their own. This can blur the lines on your tax return and make life harder for you and your business in the long run. Avoid confusion and set a steady wage for yourself on the same payroll as your employees. By paying yourself a set wage according to your businesses financial capabilities, you are keeping the integrity of budget alive by separating business expenses from personal expenses.
Your goal as a business owner should be continual growth. This is only possible through smart budgeting and making educated financial decisions. By keeping an objective eye on your business with the help of a well written budget, you can avoid falling into tough times and having to borrow money.