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2019-01-28 22:05:53How To Run Your BusinessEnglishEffective budgeting should be a vital tool in every small business owner’s management arsenal. Investing some time and effort in setting...https://quickbooks.intuit.com/au/resources/au_qrc/uploads/2018/09/iStock-868264644.jpghttps://quickbooks.intuit.com/au/resources/how-to-run-your-business/how-to-build-a-better-budget-in-2019/How To Build A Better Budget In 2019 | QuickBooks Australia

How to build a better budget in 2019

2 min read

Effective budgeting should be a vital tool in every small business owner’s management arsenal. Investing some time and effort in setting a better budget this year can help you safeguard your profit margins and save you unnecessary costs. Here’s how you can build a better budget for your small business in 2019.

Why setting a budget is important

Setting – and sticking to – your budget is an effective way to protect your profit margin and the overall profitability of your business. Your profit margin is the amount of money your business makes on each product or service you sell after your expenses are subtracted.

Any costs that exceed your budgeted expenses will eat away your profit margin – and eventually bust your financial resources. That’s why it’s vital to know exactly how much you can afford to spend while still making a profit. Setting these guidelines across your business is the essential function of your budget.

How to set a budget

Every budget walks a fine line between over-capitalising and under-resourcing your business. For example, spending big on things that are not essential to the successful operation of your business can take an unnecessary chunk out of your profit margin. At the same time, setting unrealistically tight budgets could leave your business without the resources you need to achieve your business goals.

So, try and analyse your fixed and variable costs to determine which expenses directly contribute to your profitability and which are unnecessarily draining your profits. Also, look for areas of your business where you can invest money to stimulate growth.

How to keep expenses low

Effective cost-cutting is all about eliminating expenses that don’t contribute to the profitability of your business. Start with an audit of your suppliers. Is there space to negotiate better deals? Are new vendors offering more cost-effective solutions? Then look at your payroll. Can you outsource any roles? Is a restructure required?

Next, assess where new technology could streamline your processes. Is telecommuting for some staff possible? Can you adopt a virtual workforce model and cut costs associated with maintaining a physical workspace? Finally, consolidate your business equipment. Can you update to new printers that are cheaper to run and maintain? Is there new machinery available that will increase your output while reducing your running costs?

How to boost profitability

Maximising your profitability involves more than simply cutting costs. For example, as part of your budgeting process, you should regularly review your pricing structure. This can help you Identify any opportunities for cross- and up-selling your services or products. Marketing should also be included in your budget. A higher marketing spend in the right places can help bring in new clients during a growth phase.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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