With a little planning based on your business’s unique data and analysis, small business owners can use these budgeting tips to keep the doors open and the business stable.

By FINSYNC

Budgeting for a small business comes down to timing and planning. Understanding your finances and making adjustments to fit your business can be the difference between business as usual and a budget shortfall. Being prepared for anything and building up a financial cushion can get your business through all manner of unexpected twists and turns. 

Optimize Timing of Accounts Payable and Receivable 

If you’ve ever watched the clock waiting for an invoice to be paid, you know that ensuring you have enough cash in the bank often comes down to timing. While a business may very well have the ability to pay suppliers, payroll, and other operating expenses, cash flow can fall short if expenses pile up before an expected payment comes in. 

The first step to building a budget is to study the ledgers. Many expenses and incoming payments or sales follow patterns, making them somewhat predictable. If you’re not using a turnkey cash flow management software solution, you can analyze these patterns manually by inputting all accounts payable and receivable as well information into spreadsheets. 

For a streamlined view of all your business’s financial information, try FINSYNC’s cash flow management solution, and take the guesswork out of timing expenses to line up with payments. Once you link your accounts, your past, present, and projected cash flow are automatically presented in easy-to-read charts and graphs. There’s no need for spreadsheets. 

Whether you prefer to take a manual or streamlined approach to analyzing your company’s financial patterns, avoid budget shortfalls by timing what’s going out with what’s coming in. 

Access a Line of Credit Before You Need It

Apply for financing when your finances are strong. Rather than when you’re scrambling during a tight month to shore up funding for when you need it. Lenders look for positive and growing cash flow. Applying when your books are in a good place puts you in a better position to access funding. You will be able to lock in the best interest rates and terms. 

It can be difficult for new and small businesses to qualify for a loan. Applying before an unexpected downturn can help improve chances. While traditional lenders often require 1-2 years of financial data, along with collateral, alternative lenders often look at as little as three months of your finances and are much more likely to extend a line of credit to small businesses, even without collateral. That’s why applying for financing during a good stretch is your best bet. Find the loan option that best fits your business’s needs in a matter of minutes with one simple application from FINSYNC’s lending network

Preemptively securing a line of credit also means avoiding having to use personal funds if cash flow fluctuates. According to the Federal Reserve’s 2019 Small Business Credit Survey, 69% of firms used personal funds to pay operating expenses, purchase inventory or meet other financial challenges.  

This doesn’t mean you should apply for a big loan you don’t need and might have trouble paying off. Using flexible funding sources such as a line of credit to pay regular expenses that your business is already incurring is a great way to build business credit and relationships with lenders that could pay dividends down the road. 

Anticipate and Plan for Downswings 

The best way to prepare for downswings is by regularly monitoring your business finances and having a plan in place based on your unique data. Small business owners are busy. Keeping track of cash flow can easily get stuck on the bottom of the to-do list. It doesn’t have to be daunting. 

Keeping an eye on your company’s income and expenses no longer requires endless spreadsheets and hours of manual entry. With FINSYNC’s cash flow management software, you can see all of your business’s finances in one place on an intuitive, user-friendly dashboard. Armed with this data and knowledge, it’s easy to visualize and analyze patterns in cash flow. 

Past cash flow can be a good indicator of regular expenses and payments as well as seasonal trends. Cash flow projections allow you to plan and anticipate potential downswings, and to make adjustments accordingly. 

Build Up an Emergency Fund

Even profitable businesses can run out of cash when more money is going out than coming in. Regardless of how good the business looks on paper. Shortfalls can wreak havoc: 82% of businesses ultimately close their doors because cash flow falls short. The more “just in case” options a business has for any unexpected fluctuations or upheavals, the better.

Aim to build up cash reserves to cover at least three to six months operating expenses. From recessions to natural disasters to cyberattacks, unforeseen calamities may have nothing to do with the health of your business but wreak havoc nonetheless. Staying open in the face of anything is vitally important; according to FEMA, 90% of businesses that are unable to re-open within five days of a disaster fail within the year. 

Small businesses can take control of their finances by keeping a close eye on cash flow management. This helps with finding ways to set money aside for emergency funds. Need some more ideas? Contact a financial professional for guidance on preparing your cash reserves.

Get Expert Insight 

Every business can benefit from expert support. Whether building up cash reserves or taking stock of the business overall. Regular check-ups with a financial expert can help keep your books and budget in tip-top shape. 

Forward-thinking small businesses run day-to-day financial operations with automated software. Having expert advice helps take financial planning to the next level. Adding employees is costly and time-consuming. Contractors are often a more realistic and affordable choice for small businesses. 

With contractors, the size and expertise of your finance team can fluctuate based on business needs at any given time. Get matched with the best partner for your business through FINSYNC’s network of financial professionals by answering a quick questionnaire assessing your budget, industry, objectives and needs. 

Knowledge is power when budgeting for your small business. Understanding your company’s financial patterns and making adjustments accordingly prevents cash flow issues and helps businesses plan for downswings. 

Building up a financial cushion in an emergency fund and accessing a line of credit can support your business when unforeseen circumstances inevitably arise. With the advice of a financial professional, small business owners can tie all of this together and develop a real plan to ensure financial stability.