Budgeting 101: How to Create a Realistic Business Budget

Once you begin to run your business, you’ll quickly realise something very important: smart financial management is absolutely essential. If you don’t allocate your funds well, then you will struggle to keep your company afloat.

How do you create a financial plan that takes your specific business into account? Let’s review a few things that all NZ business people should think about when creating their business budgets.

How To Create a Reasonable Budget for Your New Zealand Business

Consider the following when creating your financial plan:

Understand Your Main Income Streams. First, look into where and how you are making money. Identify all your revenue sources, including sales, services and any other way you make money. 

This way, you can see how you can get the money to fund your operations. It’s vital to keep an eye on these income streams and your cash flow in general so that you know when your cash flow is high, standard or low. During times of low income, you should act smartly to avoid overspending.

Use Finacial Forecasting To Predict Future Profitability. Financial forecasting is the process of analysing data to predict how your company will do in the near future. Data like your business’s financial statements and current market trends can be used to predict your profits, expenses and more in the upcoming months. 

Financial forecasting is a very powerful tool that allows you to get a glimpse at your most likely financial future. With this knowledge, you can look at projected income, expenses and dips in profits to proactively plan for what you will do.

Track Expenses. Just like how you should track your income, you should also track your expenses. Understand where and how you are spending your money. If possible, you can look into more cost-effective alternatives to your current expenses. 

For example, if you purchase certain materials to create your products, then you can look at cost-effective alternative suppliers. However, make sure you also prioritise quality to ensure your products are created with reliable, top-notch materials. 

Set Clear Goals. Define short and long-term financial objectives so that you have goals to build towards. These can include breaking even, saving for an expansion or improving cash flow. Be sure you make your goals measurable and specific to guide your spending decisions.

Keep your growth goals in mind while you budget for your business’s current state. How would you like to expand your business? Think about scaling operations, training or hiring staff, investing in new technology or equipment and other steps you could take to make your company better. 

After you identify your main objectives, create actionable steps to reach them. It’s vital to stay realistic, positive and motivated when setting and working towards goals. 

Have An Emergency Fund. Unfortunately, emergencies and unforeseen expenses can happen when we least expect them. Rather than pulling from your budget to handle these unpredictable events, create a contingency fund so that you always have some money set aside for emergencies.

Without an emergency fund, you may have to use your currently budgeted funds for unforeseen events. Then, you’ll have to budget again to make up for the lost money. 

Use Tools To Streamline The Process. The modern world is filled with useful digital tools that you can use to improve your financial management tasks. For example, at Business Like, we have an array of free business tools that you might find useful as a New Zealand business owner.

We welcome you to visit our website to explore our business tools or to contact our team for additional support regarding online software that can help you improve the way you run your business. Useful tools, software and programmes can streamline your business, saving you heaps of time and stress.

Regularly Review Your Budget. Setting a budget is not a one-and-done thing. Routinely review your budget and your other business plans to see if they still align with your operations.

Businesses grow and change over time, so what worked for you a few months ago may not be right for you now. Even if your business is doing fine, you should still follow a reviewing schedule to be safe. Look through the various parts of your budget and overall business strategy to identify qualities that you should change to better meet your current needs and goals. 

The business world can be pretty volatile, so regularly readjusting the way you manage your business can keep your business resilient. 

Setting A Proper Budget for Your New Zealand Business

Good financial management can be the difference between a new business that goes strong for years and a startup that doesn’t quite get as far as you hoped. At Business Like, we strive to help our clients build their way towards success through financial services, business training and more.

Are you an NZ business owner who’s searching for innovative ways to get ahead? We invite you to call us on 09 262 0726 or use our contact page to reach our team.

Get your business on the right track with Business Like.