Every business is required to spend money in order to make any, but this does not mean than you should be spending without a plan. Additionally, the best way to invest in a business is often the way that allows you to spend the least amount of money while getting the best possible return (unless of course this equates to inadequate investments in your own company). You therefore want to ensure that you have a budget and that you choose the most cost-effective ways to use it.
Signs You are not Doing Things Right
There are Clear Indications of Overspending
The basic idea of making a profit is to earn more than you spend. This does not mean refusing to spend money where it is necessary, but it does mean spending as is necessary and holding back as much money as you can, for as long as you can. You therefore know you need budgeting help if you always seem to need more money even if your business is profitable.
You Always Have an Unresolved List of Obligations
If you keep depleting your funds yet you have a list of things that are not getting done then it is time to rethink how you spend. This factor ties back into to overspending and can be the difference between growing your business and going out of business. Remember, you never want your creditors or the people you do business with to lose faith in you, so you have to fix any problem that could lead to this.
Important Bills Get Paid Last or Not at All
It is one thing to not cover your entire “to do” list, but it is another thing to not cover the important items on it. Budgeting allows you to prioritize your expenses. This means you should always start with the most pressing obligations (i.e. the ones with the nearest due date), the most important obligations (paying over taxes for example), or those that will benefit you the most (such as paying your credit card bill so you will have the funds to use again).
Your Petty Cash is a Bookkeeping Nightmare
Does your account usually end up unbalanced at the end of each week or accounting period? Are your major expenses accounted for yet, you cannot tell what the problem is? You could be failing to reconcile your petty cash with the rest of your business accounting, failing to budget for it as well as failing to use it for its intended purposes. Any of the three could be an issue since it means not knowing exactly how much money you have. Plus, not using it wisely could either mean overspending or taking money out of the rest of the budget to cover items you have already provided for while your petty cash sits there.
You need a competent bookkeeper to help you sort things out if any or all of the above applies to you. While it may seem simple, remember that poor financial management on any level could lead your company to doom. Talk to us to see how we can help.