| When Business Budgets Strike Back

Posted in Cash Management at 9:00 AM by Loftis Consulting

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The trouble with starting a business is that it can cost quite a lot of money. In fact, the average for the costs of a start up in the first year is close to thirty thousand dollars. That’s crazy when you think about it because there’s a good chance you have nowhere near that much in your savings. And you will be using your personal funds to pay for the company, at least at the beginning.

Although, as it turns out that first payment is just the first problem you’re going to encounter with costs. You will also need to think about whether you’re getting a quality service from the companies that you’ll be paying to keep your business running. On top of this, there’s the issue of taxation. A lot of new business owners completely forget that they’ll have to pay tax as soon as they start making money and list doesn’t end there.

Let’s look at some of the great issues you’ll face with business finances and figure out how to handle them effectively.

 

Getting the ROI

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Getting a solid return on investment is crucial if you want your business to be a success. You need to make sure that you make money from whatever you buy in the long run. A good example of this would be hiring your first employees.

When you hire your first team members, you need to work to get the best on the job market. One of the worst mistakes you can make is hiring workers just to make sure you have a team. It doesn’t matter if you have a full staff, if they’re the wrong people for the job, your business will fail.

To ensure you get the best team, you need to work with other people in the industry. In this case, your number one source should be a recruitment agency such as https://www.rec.uk.com. A recruitment agency acts as a gatekeeper, and behind that gate, you’ll find the best talent for your company. But to reach it, you have to be willing to invest a little of your funds into a recruitment service.

This isn’t the only situation where an ROI is going to be important. If you’re running your business from an office, you’ll need to purchase quite a lot of tech. Make sure you are thinking about the long-term benefits of this technology rather than a short term small cost. For instance, you can buy older, second-hand tech at a lower price and immediately cut the costs out of your start up. In the long run, however, this tech could cost you more money because it’s less efficient. You might also find that it breaks down more easily and isn’t as reliable. This is a solid example of why the cheapest isn’t always the best option.

 

Finding the Funds

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As already mentioned, your first year on the market will be paid for out of your own pocket. As such, you need to be careful with spending. You’re going to run out of personal funds pretty fast regardless, and at that point, you’ll need to think about loans.

With sites like https://personalmoneystore.com, it’s easy to get small amounts of money fast, and this is your best option. Do not rush to borrow hundreds of thousands that you won’t be able to pay back. Keep the amounts that you borrow small and sweet, that way their easily manageable. Don’t forget, it’s not the overall cost of the loan that you need to worry about. The interest rate is a killer. The bigger the loan, the more interest there will be. Borrow money, pay it off as you go and your business will always stay in the green.

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Of course, you might find that eventually, you need larger levels of capital. The best way to get it is to ensure it’s provided by revenue. But you won’t get this level of revenue with the typical customer base. Instead, you need to think about appealing to key players who could take your business to the next level. We can look at an example of this by thinking about a car repair company.

A car repair company will be working with a local customer base. They’ll be repairing cars of individual private customers, but this isn’t where big money is. To get big money, car repair companies need to get a business client. That way, they can work of car fleets and that point you have a massive source of constant revenue. There are possibilities like this in every business model. For instance, a wholesaler could end up supplying a lot of stock to a superstore. This is all about finding the business leads and using them to your advantage. You can read more about this on http://convert.leadforensics.com.

 

Dealing with Taxes And Unexpected Bills

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Finally don’t underestimate the danger of taxes in your business model. This might seem like a small consideration, but it isn’t. Taxation can be a big threat to your business if you don’t keep your records accurate. Let’s say you estimate a few of the bills in your first year running your business. This could lead to an audit and a thorough investigation of your company finances. That’s the last thing that you want.

It puts pressure on your business and might ultimately end up with a large bill you weren’t prepared for. To avoid this, you  might want to hire an accountant and you can find one on https://www.sparehire.com. This can seem like an expensive, unnecessary hire, but if it keeps you out of trouble with the IRS, it will be worth it. If you are looking for more extensive services, Loftis Consulting can provide CFO services for cash analysis and long-term business financial planning.

As for other unexpected bills, you always need to adjust your budget to accommodate a few extra thousand. You can use this to fix tech if it breaks down, hire services that you didn’t think you would need and cope with possible loss. Don’t forget when you open your company you will immediately be at risk of hacks and theft. Insurance should provide a safety net but having some extra funds to cope with the short-term repercussions is always a smart move.

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