The importance of good budget management

Budget management is an essential part of any business model, as it ensures that a firm is not operating beyond its means.

For owners, bosses and managers, maintaining regular checks on finances is key if they are to recognise any issues at the earliest possible stage.

The latest available data from the Small Business Administration revealed that around half of businesses go bust within five years, while only a third survive for ten years or more.

More up-to-date figures from Ormsby Street meanwhile suggest that just 40% of firms will see their fifth birthday, highlighting the array of challenges that businesses face.

Nearly every aspect of business carries some sort of cost, from the hiring process to expansion, expenses, office costs and general bills, which is why budgets need to be carefully managed.

Without tracking spending, a firm may face difficulties and require alternative finance options orturnaround management in order to keep trading.

The focus for employers needs to be on the bottom line and on keeping costs to a minimum in as many situations as possible.

In order to achieve this, firms need to understand the options that are available to them, as well as the positives and negatives that can accompany each.

Marketing and promoting a brand is also key, as it does not have to require large financial outlays – especially in an online world where social media dominates.

Using such platforms enables businesses to compete with much larger rivals while giving them the ability to form close bonds with customers and potential clients.

It also enables a business owner or financial manager to focus on other aspects of the business where finances could be required.

Negotiating better deals is also key for business – after payroll, the costs for goods and services is often the next highest expenditure so efforts should be made to cut this in any way possible.

Having clear targets when it comes to budgeting should make the process easier to manage, as it should be possible to spot problems and implement the necessary changes at a faster rate.

By Phil Smith

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