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Budgeting In Business – Why Every Penny Counts

11th Jul 2013
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There is a distinct divide between those who believe that business is about money and those who think it is about passion. Indeed, both are true. One cannot have a business that is successful without caring deeply for the area in which one’s business is centred, aside from the odd anomaly of course.

In a similar way, one cannot have a business that is successful without taking immense levels of preparation and thought when it comes to money and budgetary concerns.

At the end of the day, every penny counts. Every penny that is not counted is wasted, and with business going hand in hand with efficiency it is necessary to take precautions when it comes to managing your finances to maintain that efficiency. It’s the same as in your personal life; each penny saved is yours to keep – so why not apply this principle to your business with the same vigour? Why is there so much waste in business when it comes to financing and expenses? How can you change this? Let’s explore.

Waste Not & What Not

Unbelievably, managing your business finances can be achieved through quite simple means. This is particularly in smaller businesses and start-ups. There are plenty of old sayings about managing money – and you might have applied them in your personal life, so why not apply them in your business?

Think about the principles you would, or perhaps should, have in your approach to personal finances. This can help with common problems like overspending. Follow these tips;

  • Cutting Back On Luxuries: The kind of luxurious goods you avoid in your personal life, most of the time, can be harder to resist in your business. After all, it’s for the business, right? It makes sense to spend on a luxury if it will help you make a living. I won’t quite say it’s impossible, but most of the time you can get by without luxuries. Don’t buy that fancy computer unless you absolutely need it; is there an alternative to use? Cut back on luxuries and you’re much more likely to remain frugal and financially sound.
  • Meet Clients Out: When you’re starting out and haven’t rented an office you probably want to have a look around at the offices in your area. That’s natural, after all it’s not ideal to show clients into your back bedroom converted into an office. But don’t max out here, meet clients out when you possibly can and don’t rent an office until you’re well established.
  • Build Your Own Website: This point was made in a great article by Andy Yates from This Is Money. Don’t bother spending lavishly for an amazing website when you don’t have to. If you do a lot of business offline then you don’t need anything flashy. If you’re in the online world providing digital services then you should be able to build a framework website yourself. Business website expenses are huge with hosting and all the other fees associated, so you can often cut back there.

These tips are useful to cut back on expenses. Of course if you do need to splash some cash on equipment and anything else which is necessary for your business then go for it. Spending money to make money can be justified to a certain extent.

Incorporating Innovation & Technology

The business world is much more sophisticated than old adages about being frugal and spending wisely.  Sayings and idioms about money only really help in the early days of a business’s existence But beyond that there are many interesting innovations you can apply to your business, these are particularly effective once a business starts to make money or becomes more profitable.

  • Use Software – There are so many different applications out there that almost anything is possible. There is probably some software that came installed with the computer you have now, look through it and see what you have. Mail clients like Outlook and Lotus Notes are excellent for email management. Use Excel and look at some specialised software for budgeting and forecasting for a greater level of accuracy. When it comes to planning, Google offer great calendar services for easy time management. Being more organised means you can more easily manage your finances. If you have the software, you should make use of it where possible.
  • Use Free Applications – This is related to the previous point, but using free software is a wonderful way to save on money. To do this just search for the type of software you need and add ‘open source’ when looking to find some free software that is actually very, very good. The notion that commercially available software is somehow intrinsically superior to free software is something of a fallacy – these free pieces of software rely on donations and the passion of their volunteers. A downside might be the lack of technical support they are able to offer, but there are many internet forums where you can get this. I’d particularly recommend Open Office for productivity and AVG Free for virus protection.
  • Used Equipment – When you start to move out into an office and grow your business it can be very tempting to splash out on new kit. For example, let’s say you’re taking on 2 new employees and want to give them both shiny new computers. Well, maybe you should choose a used computer to save some money. If that’s being too mean and you really need them for your new employees to do their work you should at least buy used furniture likes desks and chairs to save on costs when you take on new people. After all, they will already be making quite a dent in your monthly costs with their pay.

Continuing to innovate beyond the basic is perhaps the most fundamental aspect of business finance. You need to look at your business objectively and think of the exact right places where you can make savings – it all depends on the nature of your business so it’s up to you to find some new innovations.

Pinch A Penny, Keep A Penny… Sometimes

Remember that you don’t have to be a complete skinflint all of the time. It’s sometimes better to spend money, like when buying something you really need. Don’t forget you should take some time to enjoy your work, especially if you’re doing well – so don’t be afraid to add a little bit extra on the next office party budget and reward yourself.

Thanks for reading. I’d love to know what you think so please feel free to comment, also why not follow me on Google+ for all the latest.

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