5 kickbutt reasons you should keep making a business budget

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Excuse my language. But your life also needs a business budget. Budgeting doesn’t just end at you struggling to say no at the supermarket. No means no anyway, right? If you’ve been faithfully preparing business budgets then you’re in good company. You may still have to reconsider how many different types of business budgets you actually prepare.

Other small business owners in Kenya kind of have valid reasons to be lax about budgeting. But only on the surface of it. The biggest reason is that payment is usually delayed. In Kenya, our finance industry has not developed enough to allow entrepreneurs to cover these shortfalls easily.

So, businesses cannot pay each other before they themselves get paid. If LPOs and other bridging sources of finance were as simple as Fuliza things would be better.

Another reason you may drop the ball on budgeting is because small businesses have few customers, comparatively. This means that a dry run without buyers is always around the corner. Small business owners are tough, no? You’re tough! And we empathize. But if you don’t try to plan ahead of these kinds of problems things only get worse. Like, why did they decide to build Thika Road without space for BRT?

Ok, your business is not mishandling public money. You could still face the problem of coming money short in different areas of your business. How? Without a business budget you cannot prioritize which needs require your money most. And you’ll end up like your one friend who owes multiple people (no, what do you mean you’re that friend?). Here is how budgeting will keep you from such:

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Predicting your future

I won’t lie to you. A business budget will not tell you where your life will be in 5 years. Small businesses don’t work like that. The most important thing for a small business is having enough working capital. Budgeting will help you anticipate this need.

How? It depends on how fast your business cycle is. If you keep data, you should, you will find the range of your money needs to run your business day-to-day. This could be over one week, two weeks or per month. One way to predict your money needs is by properly valuing your stock.

When to acquire and dispose of assets

Yes. Assets. Not people. That’s not cool at all. There is a fine print with assets that most small business managers in Kenya casually ignore. It is depreciation. If you read our blog, you already know.

You know how we always talk about cars losing value and how they are generally a bad “investment?” In your business, depreciation is an expense that reduces your profit. How does it come about? It comes from the value your business assets lose over a particular period of time. That laptop, for example, loses Kenyan Shillings value every month. Don’t worry, we’ll show you how to calculate depreciation.

READ: QUICK BUSINESS BUDGET CHECKLIST

For now, go with this; you have to know how much a particular business asset will give you before you own it. And, and when to get rid of it down the road.

Rating your work

The problem all of us have about rating ourselves is finding a benchmark. Tweets advice us not to compare with others. Cool. So, what is the way forward in business? Come up with your own expectations and put them down in numbers. That is what a budget is. You can then compare actual results with milestones you had set. You can monitor your business revenue, profit and stock turnover through this.

Negotiating deals

People say women are weak at negotiating. I don’t know, my friends say their wives don’t budge. On a serious note, negotiating with customers and suppliers isn’t just about confidence and language. You also need numbers. They don’t lie do they? Numbers help you find a range to pay or receive money for. A complementary role in this is you getting around to compare quantities, quality and prices.

Getting your worth

Do you deserve nice things? Then don’t refuse to interfere with your pricing. Small businesses are supposed to be flexible. This means your prices should adapt to frequent changes in customer levels, spending habits and costs of supplies. To be ready to respond, you need a business budget that will keep you afloat in terms of working capital. Sooner that you think we will share business budget templates as we did with financial records you’re supposed to maintain in a small business.

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Web Content and stuff. You can reach me you know: editor@herbusiness.co.ke, malitrobert@gmail.com

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