By: Kenneth Wardle | Chief Executive Officer
As the new year approaches, your small business planning should address some basics including forecasting your budget, reviewing your insurance coverage and emergency planning, organizing for the next tax year, and strategizing for marketing and outreach. Jet Capital presents our Getting Ready for the New Year series to tackle these topics and provide useful information to prepare your business for a fantastic year.
Before we kick off the new year, here are some smart strategies for managing your small business budget and cash flow. Set aside some time for smart financial planning before the end of the year and your business will reap the benefits throughout 2017.
Your Small Business Budget: Understand Your Costs
Although there are still a few weeks left of holiday shopping and dining, now is the time to take a close, critical look at this year’s budget. Before you plan for the future budget, it is time for some variance analysis. What was the real world difference between your planned budget for this year and what really happened? What factors led to these differences?
Fluctuations in prices may have thrown a wrench in your small business budget this year. For example, while fuel costs were relatively low for much of the year, some products like avocados became much more expensive than usual. Take a look to see how your original budget for materials and operating costs compared with what happened in real time.
If you offer benefits to your employees, review these costs, too. There may be changes on the horizon in terms of insurance, overtime obligations, and even minimum wage. Small business owners will need to be alert to these changes and may feel more comfortable budgeting now for increases in costs.
Was your marketing budget on track? How did it succeed and where could you make spending more effective? If you are using marketing analytics, you should have a good sense of where adjustments might be made to improve your ROI. Here are 4 ways to improve ROI on local marketing that you can factor into your outreach next year.
Understanding your costs and planning for fluctuations will keep your budget on track, but be realistic about emergencies and surprises. Even the best laid plans can be affected by equipment failure or a sudden spike in prices for materials. Or perhaps your business is ready to grow and a fantastic opportunity requires fast action like hiring a great candidate. When the need arises for fast funding, Jet Capital merchant cash advance products are a strategic way to navigate these challenges to your budget and cash flow.
Estimating Sales for Your Small Business Budget
Examining your sales from this year should help you plan for next year, too. If there were seasonal fluctuations, did they meet your original expectations? Were there severe weather events that caused slow days?
Did you see a few fantastic days due to local events or a passing trend? Be sure to record any unusual traffic that may have been a one-time occurrence, perhaps you saw a few wildly busy days in July 2016 because your business was suddenly an in-demand Pokestop. Remember to mark these as unusual when tracking year-to-year comparisons.
As with all planning, the key is to be realistic from the very beginning. Strive for great returns but plan with the averages you saw in your business over the past year or two. If your business is very young, you may need advice to make these estimates since you won’t have previous sales as a basis of comparison.
Likewise, if you are planning an expansion or new location, you may need to revisit your demographic planning to help estimate your sales. Again, be realistic and build in some flexibility if you don’t meet the initial expectations of your small business budget.
As you move through the year, your business may need cash quickly to refresh inventory, react to a trend or hire seasonal help. The speed of our merchant cash advances can help navigate these requirements while keeping your budget on track. Flexible financing like a merchant advance is a great tool for managing cash flow when you need to act fast to grow sales quickly.
Set Up a Budget Timeline for Reporting and Analysis
Planning a budget is never a ‘set it and forget it’ proposition. Michael Burdick, CEO of Paro, a network of vetted freelance financial professionals, says they “typically recommend that smaller companies set up quarterly budgets with monthly financial updates.” This recommendation tracks spending and allows for some “buffer room to course correct if needed.”1
In other words, while making a budget for the year, plan each quarter with monthly analysis and reporting. Perfect alignment over the entire year would be impossible without quarterly and monthly planning. No one can see into the future, so keeping a budget dynamic and flexible will make recording and goal-setting more realistic over the course of the whole year.
Following through with quarterly and monthly reporting will keep you in touch with the health of your business. Any area of your business that needs attention should jump out at you early, so you can address issues quickly.
Free templates are available from SCORE.com for 12-month profit and loss planning and 12-month cash flow statements. These templates can help you gather and organize the information you need to make smart budgeting decisions.
Jet Capital is here for your small business with smart business funding. Our strategic alternatives to a business loan are fast, flexible and designed to work with your business. Contact us today for more information about how a merchant cash advance could work for you.
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