Covering bases: budgeting mistakes you can easily avoid

Budgeting and Taxation

Building a business from the ground up is no mean feat and it can be a huge challenge for many of us. If you are looking to build your own business this year and make sure it stays successful and stable financially, these are the top mistakes you should avoid.

FAILING TO CONSIDER REMOTE TEAMS

In this day and age remote workers are the bread and butter of online businesses all over the world, and as well as this they provide companies with a cheaper option. The difference between a freelancer or outsourced company and an in-house employee is huge and could make a big difference to your outgoings every month. Make sure you consider remote workers that will be able to provide a great service without the extra costs and benefits.

FAILING TO IDENTIFY HIDDEN COSTS

There are a lot of costs associated with a business, and when your business begins to fail you should do some root cause analysis and find out what’s going wrong. We all think of the cost of supplies and shipping, but do we consider the cost of electricity, rent, software, pensions, and more?

Make sure you understand every cost associated with your business because it will honestly make a huge difference.

SETTING UNREALISTIC GOALS

One of the worst things you can do as a new business owner is set unrealistic sales goals for your first few months. It takes time to build a business, and even if you have set yourself up for success it can take time to actually make a profit from your venture. Understand the market and consider your audience, and set yourself an attainable goal which is sustainable long term: even if your goal is simply to break even.

IGNORING THE BUDGET

A budget is your friend. Its a guide to how you expect (not hope) the financial year will progress.

It is incredibly important when you start a business that you learn how to set a budget and stick to it. In our daily lives we must be able to set a budget and live by it, and this should be something you also do in your work life. Set a budget which is based on your costs and projected income and STICK TO IT. Don’t make a budget if you are going to ignore it because it will just be a waste of your time.

CREATING COMPLEXITY

Many of us see a business as a overtly complex organism, but in reality a business is about providing a product or service to a customer for money. That is it. A lot of new business owners make the mistake of trying to emulate large corporations with their operations and processes in their first few years, but over complicating your process won’t do you any good. This is a critical error. It is always best to remember the manta, ‘keep it simple, execute well’.

FORGETTING ABOUT TAX

We all know taxation is a pain… stressful even. However ignoring it and hoping it will go away is not going to happen. It is a necessary part of running a business. You must always take the current tax regime and timings into account. Even before filing a tax return for your business, calculate your monthly tax and save this to the side to pay later. This advice is especially important for readers seeking to bootstrap their start-up on a tight budget.

Remember, if you are totally unsure what to do in terms of taxation, make sure that you think of asking a professional or hire an accountant to help you. It is important to do this right and if you don’t, it will make a massive impact on your business.

BUYING AN OFFICE

As a new business owner you may have a few things on your checklist:

  • Hire employees
  • Buy an office space
  • Download important software

However, buying or renting an office is not necessary. As this year has shown with the lockdown due to COVID-19, many businesses can cope just fine working from home.

If you want to save a lot of monthly expenditure and a lot of hassle in day to day operations, don’t buy an office and allow your team to work from home instead. You’ll save money on rent or a mortgage, on equipment, furniture, facilities, bills, and even things like food and drink. It will reduce your outgoings massively and won’t impact the productivity of your business if you do it right.

The most important thing to remember when making a plan for your business is that there is no right answer for all. Every business is different and you need to work in a way that feels right for you and your team.

Find your flow and do what feels right for you, even if trial and error is an element here.

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