Budgeting smart for small business

By Anne Gillespie, Chief Financial and Governance Officer

When you are the owner of a small business, sometimes margins can be razor thin – and the difference between success and failure is your ability to develop and stick to your budget. Taking the time to create a financial plan that covers you both when cash flow is high and when costs go up, will help ensure a successful and prosperous future for you, your employees and your shareholders.

I believe there are some universal truths about the art of the small-business budget. By applying a few simple financial literacy principles, anyone can become a "budget guru". Here are my thoughts.


1. Consider costs and cash flow timing

There are many, many variables that come into play when estimating costs. Take a look at your budget and make sure you consider everything from product/project delays to the need to hire new staff to unexpected expenditures from equipment or facility upgrades. If you include a bit of wiggle room, you’ll ensure that whatever happens, you’re prepared and not left short.

Be mindful of your sales or cost cycle as well – when are large line items due to be paid? When will cash from big sales be coming in? If you can align your budget to this cycle, you'll be positioned to take advantage of strong cash flow in one quarter without feeling short when multiple expenses come up in the following period.

2. Involve your team
As a small business owner, you’re ultimately on the hook for your budget. But that doesn’t mean you should tackle the activity alone. Involve your team – everyone from managers and directors to sales people and accountants – so that they can share the intimate details of ongoing projects, operating costs and sales plans. This will help you capture every detail of your budget accurately.

Communicate your budget once it is final with all stakeholders involved in creating it. Be transparent about any changes or revisions to what was asked for to help increase trust. Employees will be more likely to stick to their budget if they can connect the dots between dollars and business strategies for success.

3. Use a governance model

A good governance model means that there are multiple checks and balances built-in to your budget development, review and approval process. This helps to mitigate risks by making sure a robust review is conducted either by a third-party or someone within your organization who is neutral or removed from the process and can validate assumptions and plans against best practises before final approval.

Be sure to conduct risk assessments and assign levels to any fluctuating or uncertain areas of your small business budget, with as much scrutiny as possible. If your final plan is vetted by multiple people with a diverse set of skills and backgrounds, you’ll be better positioned to handle anything the market throws at you and adapt as required.

While creating a small business budget is no easy task, if you follow these principles you’ll be set up for success. If you need some help, talk to your local credit union for award-winning customer service and competitive product offerings. We’re leaders in small- and medium-size enterprise (SME) lending and can support your budgeting process every step of the way.