Going over your budget from your last year of business is essential when entering into your next. Reminding yourself of where you allocated money and where you had success in the previous year can guide you through your next budgeting meeting.
When entering back into your first quarter, you should aim to create tangible goals your business can focus on reaching. These will set up how the rest of your year will go and can be an effective indicator of the highs and lows to come.
To learn more about strategies to implement to help reset your small business’s budget, read more below.
Why is a budget important?
Sticking to a budget will help keep your small business on track in the upcoming year. When you run a small business, you might not have surplus funds on hand, so a budget will come in handy when you’re trying to make the most out of your resources.
When working with a budget, you can also learn how to allocate your time and money toward specific initiatives. This showcases your company’s priorities and helps you come up with actionable items to help you reach your goals.
Coming up with targets for your business helps you focus on what to do with your money. A target is an end goal. You create a target and then come up with the necessary steps to reach it.
“Being broad about your goals isn’t always bad. Allow yourself some flexibility, and you’ll find yourself coming up with multiple ways to solve problems and reach your end goal,” says Jack Carrere, CEO and Co-Founder of Prokeep.
When working with your Q1 budget, develop a handful of targets that could be achievable in the next three months. Make sure to focus on just the next quarter and don’t create long-term budget plans just yet.
Putting your budget into action makes it clear where your priorities are. As you break down your Q1 budget, you will understand better where you should be allocating your money.
“Making a conscious decision on how much to spend, how much to save, and what to reduce or let go provides tremendous direction,” says Jerel Butler, founder of Millennial Financial Solutions.
With a concise budget, your small business will be able to remain self-sufficient over the next few months.
10 strategies to reset your business’s budget
Resetting your business’s budget will require some work, but right now, just focus on the first quarter’s budget. Creating a budget for the entire year should be something you are actively working on while breaking everything down. We recommend implementing the following 10 strategies when developing your Q1 budget.
1. Review your current budget
Before you can create a new budget for Q1, you should review your budget from the last quarter. This will give you a better idea of your current financial standings and help you while you create a plan for Q1.
“Review your budget every few months, just because! You can never go wrong with knowing where you are financially. When running a small business, you have to be on top of your budget—one small slip up, and you could end up having to reallocate your funds,” cautions Sid Shamim, CEO & President of Headway Capital.
Once you have an idea of your last quarter’s budget, you can identify where you struggled and where you found success. This might change your Q1 budget to make sure you’re putting more money where you need it.
2. Set an agenda
Create time for an all-hands-on-deck Q1 budget meeting. Every team member should be involved and a part of budget allocation. Come up with an agenda to make sure you are going over important tasks and goals.
“There’s always a lot to go over when re-doing your budget. You have to prioritise your goals, and coming up with an agenda can streamline your focus,” says Natalia Kuvelas, Marketing Manager of Custom Goods.
Follow along with the agenda to discuss each department’s budget, come up with your targets, and answer questions as you go.
3. Create financial goals
Goals for your Q1 budget should be considered attainable. If they’re broad, keep them within reason regarding what you can accomplish in the next few months.
“You need to know what you’re working towards. That way, everyone can contribute their ideas on how to reach that goal. When everyone is involved in the execution of the budget plan, it becomes easier to see what everyone’s role will be,” suggests Andrew Chen, Chief Product Officer of CommentSold, a company that specialises in Shopify live selling.
Sit down with your team and brainstorm what some financial goals of the business should be, relating to each department, for the next three months. Once you’ve set your goals, you can break them down into action items.
4. Cut unnecessary expenses
A part of going over your current budget is identifying places where money could be better allocated. You may realise you’re spending too much on your packaging and shipping materials and make a goal to find a cheaper way to source your material. These small changes can make a huge impact on your ability to save money and use it elsewhere.
“You will likely end up trying out new places to source items, subscribe to new platforms, and spend money in places that will seem unnecessary in the next quarter. Budget planning is the time to cut those expenses that don’t serve your business and find a new way to utilise that extra money,” shares Jim Mitchell, Chief Growth Officer of Awesome CX by Transcom, a company that specialises in customer experience solutions.
Staying updated on where your money is going will allow you to make these changes every few months. If how you’re spending is no longer benefiting your business, you can cut the expense right then and there.
5. Identify your fixed expenses
There are some expenses you’re going to want to keep. These might be benefiting your business, or they might just be an absolute necessity. Paying for antivirus software or your workplace’s electricity bill are unavoidable expenses, so be sure you factor them in.
“A clear budget and a comparison of spending to revenue reveals whether your project is being sustainably managed and whether it will add value to our economy in the long term,” writes Joe Lonsdale, founding partner at 8VC.
When you have a fixed expense sheet, you can give yourself an idea of the minimum of money you will need to make in order to pay everything you owe. This gives you a baseline to jump off from, and you can coordinate your budget to accommodate those expenses.
6. Set up automatic payments
You want your budget meeting to end up taking things off of your plate rather than adding things to it. Determine easy solutions to problems by setting up automated payments. This will become clearer to you after going over your fixed expenses, but it helps focus your energy on other tasks.
“For the money you can’t control—like your bills and payroll—you should set up automatic payments. It’s money that is going to come out of your bank regardless, so don’t spend any more time on it than you need to,” suggests Scott Chaverri, CEO of Mito Red Light, a company known for their red light therapy devices.
Simple tasks like this can be completed during your budget meeting and are an easy agenda item to check off of your list.
7. Prepare for the unexpected
When planning your Q1 budget, don’t be afraid to come up with different scenarios that might throw off your budget. This is a moment for people to express concerns they have and to prepare for any kind of situation.
“Small businesses can try to keep to a budget, but they don’t know what is going to happen throughout the year. No one can predict how the weather or inflation might impact businesses, so being prepared is all you can be,” explains Brianna Bitton, Co-Founder of O Positiv.
Staying prepared for the unexpected will have you thinking weeks in advance. If one plan falls through, you will be prepared for the next option. Money fluctuates, so you need to have a backup plan.
8. Come up with a new budget
Once you’ve started your budget meeting and have gone over your goals, expenses, and revenue estimates, you can finally put some numbers out there. Creating your new budget for Q1 is going to be influenced by a variety of factors.
“Setting a budget may be a bit overwhelming, but when you are equipped with the right tools and have an understanding of your business’s budget history, you will be able to find a budget that works for you,” says Agatha Relota Luczo, Founder and Chief Creative Officer of Furtuna Skin.
Again, you can always make changes to your budget if you need to, but know you will be checking in on your progress and setting up your budget for Q2 in a few months’ time. Everything you learn from Q1 will be useful in your next quarter.
9. Monitor projects throughout the quarter
Keeping track of the progress your projects are making will give you an idea of how your budget should look. When you monitor how your budget is being impacted, you can make changes and take notes for future planning.
“Your Q1 budget will teach you the impact money allocation has on workflow, revenue, and your employee’s ability to perform,” explains Jenny Herbison, VP of Marketing at Craft Docs, a company known for their helpful meeting notes templates. “You have to stay on top of these things so you can learn from them and incorporate your findings into next quarter’s budget.”
Scheduling check-ins throughout the first quarter will allow you to be involved in sticking to your budget. Allowing for some flexibility might be necessary as projects move forward and come across financial roadblocks.
10. Listen to your employees
You are going to want everyone to be involved in your budget planning. They might not make the final decisions, but take your employees’ words into consideration. They know parts of your business better than you do, so use their knowledge to your advantage.
“Be sure to discuss with your team their thoughts on budget allocation. You aren’t always involved in every aspect of your business all the time, so discussing everyone’s opinions will make prioritisation easier,” says Asker A Ahmed, Director of iProcess Global Research.
You should be working with your team because you are a team. Not only will this make setting a budget easier, but it will also add trust and communication to your team and help your business function smoother.
Set your budget today
With your next quarter quickly approaching, you need to be preparing for money allocation. Use these tips to create an agenda and plan your budget with your team. Allow the next quarter to continue to guide you throughout the rest of your year, and make data-backed decisions to take your company to the next level.