How to build a budget and to manage your expenses accordingly

The biggest challenge that a startup or a small business can face is to build a sustainable budget for the coming year and to ensure that all the expenses are within the planned budget limits. Naturally, when you are starting your business, it is not always obvious to control all the cash flows. You need to find a balance between sufficient cash liquidity on one hand and spend your budget to realise your projects and develop your business on the other hand. Here are a couple of tips to help you anticipate and which are easy to implement in your daily routine.

1. Main components of your business budget

When building your budget you need to consider your income, your fixed and variable costs, one-time expenses and your profit. The budget is calculated on a yearly basis, divided into 12 months and should show both the estimates and the actual amounts. Use a spreadsheet or an accounting software to have a general overview of all the categories on one page.

2. Let a margin for more flexibility

We advise you to have a conservative approach when planning your yearly revenue, to avoid ending up with a loss. You can include in your budget an activity growth, but always remember to mention the related additional costs resulting from the increased expenses. A dedicated amount should be reserved for major unexpected events.

3. Adjust your budget

Observe your activity and review your budget accordingly to bring necessary adjustments. Reassess your fixed expenses and think if you can cut some of them. See if you have the possibility to increase your sales without spending more. Make a monthly review of your actuals versus estimates and note the main trends and gaps.

4. Unreliable payers

Even if we are expecting a smooth cash income, it can sometimes happen to have missed or late payments with the customers. This temporary decrease of income combined with ongoing expenses might have an impact on your global budget. To minimise the negative effect of such a behaviour on your business you can create and communicate to your customers business policies on late payments.

5. External factors

Your business activity is permanently fluctuating due to its external environment. Seasonality has a strong impact depending on the sector of industry. During a year there are cycles of peak time followed by a slow down period. The amount of expenses have to be planned taking into account those changes. You can also save money from the revenue generated during peak periods to spend during calm periods. If you lack human resources think about hiring temporary staff during busy times. It is important to regularly monitor economic and legal changes which have consequences on your industry.

6. Cautious spending

Before deciding on a new expense, check if this is unavoidable. Some expenses can be postponed to the next year or cancelled. Negotiate flexible payment with your suppliers, to avoid paying a big amount at once. Communicate with the other departments on the targeted expenses and prioritise together your costs.

How can Everest help you to manage your expenses?

Everest offers you an increased purchasing power. You can do your purchases now and repay your full balance at the end of the month or at a later stage. In addition you can top up your card and increase your spending limit if additional expenses have occurred. If you have insufficient funds in your balance, you can use a credit line subject to everest approval. This offer can be particularly beneficial to small businesses or startups which are just launching their business, and are facing difficulties with unreliable payers, unexpected events or urgently seeking funds for new investments To better manage your company expenses, open your everest account here.

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