It’s all about budgeting. If you are the owner of a small business in Singapore, you’re probably contemplating that you have a small budget, right? However, with all the expenses including start-up costs and loans, it can be challenging to get started on the right note if you fail to accurately forecast and account for your payments in advance.
Irrespective of size, all businesses experience fluctuation in their finances at some point in time. Therefore, creating a budget is essential to manage your money and streamline your operations. Budgeting can help your small business handle all financial burdens while waiting for your payments to arrive. However, sometimes it becomes an uphill task to come up with a balanced budget.
Generally, a balanced budget will help you:
- Forecast your expected earnings
- Plan your expenditure
- Make confident financial decisions to achieve your objectives
- Evaluate differences between your plan and reality
Below are indispensable tips that our proficient business improvement experts at Tianlong Services have compiled to help you create a stable budget to manage finances for your small business in Singapore.
Create a Successful Business Plan
When running a small business, you can easily be bogged down with everyday challenges and lose focus on the bigger picture of your success. However, to be successful and remain dedicated to achieving your objectives, budgeting calls for preparing and reviewing a comprehensive business plan to regularly monitor your financial performance periodically.
Even though planning may seem obvious, some small enterprises ignore the process and fail miserably due to unforeseen bottlenecks in their finances. Planning ahead means that you are closely managing the financial books of your business to create a viable budget that foresees the amount of expected income and projected expenditure. Creating a business plan will give you an idea of your expected profits and turnover, along with the current and future outlook of your business operations to guarantee success.
Tally Your Sources of Income
One of the key elements of a good budget is figuring out the amount of money your business is expected to generate, especially on a monthly basis. For small businesses, always start with your sales figures and then add other income sources. This means that you must know the difference between direct and indirect income.
Direct incomes are the incomes generated directly through business-related activities, which largely takes account of the sale of goods and services. Indirect income is generated from other activities other than the primary operations of your business. For example, sale of old newspapers, rent for subletting, insurance commission, etc.
Overestimate Your Expenses
As a small business owner, your operations could attract many clients, which forces you to operate on a project-to-project basis. Since clients have different needs, this means that their projects will not necessarily turn out exactly the same even if you are providing similar products or services. Therefore, it is important to overestimate your expenses because it’s difficult to foresee their needs exceeding your budget.
To avoid reacting to the unexpected, you should overestimate their expenses as a survival tactic of hedging against risk or failure. Every project usually has an unanticipated extra cost; therefore, you should budget slightly above your anticipated line-item costs so that you remain to be prepared no matter what.
Build Your Budget from Revenues
In Singapore, a number of small businesses prefer setting aside about 3-5% of their actual or projected gross revenues for marketing purposes. However, it’s important to note that the most accurate allocation is based on many factors, such as your business capacity, your sector/industry of operation, your projected growth, and the impact you want to make in the end. For example, in order to establish their brand in the market, most startup retail businesses would set aside 20% of their sales revenue on marketing.
For small business owners with revenues of less than SGD5million, the best advice from Tianlong is allocating about 7-8% of revenues on marketing splitting the budget between costs for developing your brand and costs of promoting your business. These include:
- Sales collateral
- Website development
The assumption behind the 7-8% rule is that your business generates revenue margins of 10-12% after expenses. With lower revenue margins, you should consider decreasing the overall margins and spending more on marketing.
Use a Checklist to Reexamine Your Budget
While the above-mentioned tips focused on detailing the key components of a good budget for your small business, this section pulls everything together for you. This checklist comes in handy because it provides you with specific elements that you can use to create your budget easily. Even though the list is not exhaustive, it will help you get started on the right note.
Sources of Income
- Hourly Earnings
- Investment Income
- Proceeds from Loans
- Product Sales
- Savings, etc.
- Accounting Services
- Cell phone
- Government and bank fees
- Legal Services
- Website hosting etc.
- Contractor Wages
- Printing Services
- Raw Materials
- Travel & events, etc.
- Office Supplies
- Software, etc.
Creating a business budget may seem difficult, but I bet it’s something you’ve thought about for a long time as a small business owner in Singapore. It’s time to take the leap as it gives you the ability to make sound financial decisions to track and grow your business.
If there are still some unanswered questions standing in your way of creating a balanced business budget, our experts at Tianlong Services are always on standby to address your challenges or concerns. Call us at 6100 1026 or email us.