Skip to Content

Business budgeting

Business budgeting
Thursday, August 24, 2017

The two most important figures in any business are “how much have I sold?” and “how much have I spent?”

Every business person we’ve ever had the pleasure of working with almost always has a more certain idea about the latter than the former. It’s always much harder to predict incomings than outgoings in every company.

With that in mind, budgeting offers lots of different advantages. In more plentiful times, assuming you stick to a tight budget, there’s more cash in the business. In leaner times, particularly for seasonal businesses where you may spend half of the year making losses, budgeting gives your company extra breathing room when you need it.

Let’s look at the Panthera guide on how to budget for your business.

Business budgeting – the three types of costs businesses face

There are three types of cost every company has to pay – “fixed” costs, “variable” costs, and “exceptional” costs.

Fixed costs describe those types of expenses that don’t change no matter how much you sell during a month.

They include:

• rent (or commercial mortgage payment if your company owns its premises),

• business rates, utilities (gas, water, electricity),

• telecoms and internet infrastructure,

• any software licences you own,

• any leases on vehicles or equipment, and, of course,

• standard salaries.

Variable costs are those expenses which do change according to how well your business is doing. For example, if you’re selling more in a month, these are the effects on your variable costs:

• you’ll buy more direct materials,

• you’ll pay the courier company more if you deliver by post,

• your credit and debit card charges will be higher,

• you may have to employ staff to work more hours than normal

• pay commissions based upon sales,

• higher volume-based licensing fees

Exceptional costs are those costs which you can not foresee and which are difficult to make provision for. This might be a bill from a solicitor if you need to threaten legal action or someone is threatening legal action against you. If you occupy leased premises and your landlord makes material improvements to the building not covered by the sinking fund, you may get a substantial bill to contribute towards those improvements.

Business budgeting – how can you budget your fixed costs?

The first thing to look for on your business account are direct debits and standing orders for services you no longer use. Because running a company is hectic and demanding, sometimes old direct debits can be left collecting money from your account for months and years as owners forget to cancel them.

Next, look at the contracts you’re actually in. Do you need the offices or premises of the size you have now? Can you transfer to a newer and cheaper location? If you can, this will get both your rent and your rate bills lowers. Do you need all the software you’re paying a monthly licence for? If you can see a legal way to leave a contract that you’re in where you are no longer convinced that what you’re being supplied with is necessary, cut it adrift.

A company’s largest ongoing bill is normally the salaries it pays its employees. Does every member of staff pay his or her way? Are there some things that staff do that can be outsourced for a much cheaper rate?

Go through every fixed outgoing and, if you can ditch that fixed cost without breaking a contract or you can switch to a cheaper supplier, do it.

Business budgeting – how can you budget your variable costs?

Variable costs offer potential savings too.

The commission you pay your sales staff is one area to look at. Can you restructure their package so that they get a lower percentage in commission up to one level of performance and a higher percentage past a point where your company makes more money than it does now?

If you carry stock, there are ways to preserve your cash. The inventory turnover ratio is a measure of how quickly it takes to sell out your stock.

Let’s say that you turn over £500,000 a year and, at any given time, you have £70,000 worth of stock in the business. Divide £500,000 by £70,000, then take the figure you’re left with and divide it into 1. Take this sum and multiply by 365.

£500,000 divided by £70,000 is 7.142. Divide that into 1 – 1 / 7.142 and that gets you 0.14. Multiply that by 365 and you get 51.1. This means that it takes your business, on average, 51 days to sell its entire stock.

Do you need this much stock? By reducing your stock level by 50%, your business will carry £35,000 more cash in it at any given time than it has at the moment.

In addition to looking at stocking levels, are there alternative suppliers offering you a cheaper price where you will have the same or a greater level of confidence in getting the same levels of service you have now? Further opportunities to budget may exist by shopping around.

Business budgeting – budgeting for the financial stress points all companies face

Better budgeting will allow you to better ride out the stress points all businesses face.

On any given month, you’ll have a large payment to make in PAYE to HMRC on the 22nd of each month followed by the wages a week or so later.

Every quarter, in just under three weeks, your business faces major cash calls with PAYE on the 22nd, quarter rental day on the 25th, wages soon after, business rates on the 1st of the month and VAT on the 7th.

Business budgeting – how can Panthera help?

Our team are always on hand to help with all your business issues, including budgeting. In the last 24 months, We’ve worked with dozens of clients who wanted our assistance to get a better grip on their money.

We’ve also just started working with Spotlight Reporting. They’re going to provide an even deeper level of analysis to businesses like yours through intuitive dashboards, reporting, and forecasting.

Want to talk with us about any issues raised in this article? Please get in touch with the team on 01235 768 561 or email enquiries@pantheraaccounting.co.uk

What our clients say

For us, there is nothing better than a happy customer. Here are just a few that let us know how much we mean to them.

Pete Dungey

Simple, efficient and most importantly, hassle-free.

We found Panthera via our search for a Xero expert. We knew the software we wanted to use, and needed a forward-thinking accountancy partner who could get us up and running, and teach us the ropes moving forward. Tory and her team have always been on hand to answer our questions, and help us to grow as a business, particularly during periods of big change, such as becoming VAT registered. They are always on hand to alleviate any concerns and help to keep our records in order, which makes our year-end accounts an absolute breeze! Being based in Bristol, our relationship is entirely email based, alongside one consolidation meeting at year end - this keeps things simple, efficient and most importantly, hassle-free.

Pete Dungey Kaleido Grafik Limited
Anita van Eijndhoven

Talk Our Language

The support and service we receive from Panthera Accounting is very good. Everything from regular meetings, a prompt e mail response and the transition of our Xero software (which we find very pro active indeed) has and is all remarkably efficient. We find Panthera talk our language and make any process as painless and easy as possible.

Anita van Eijndhoven Quidne-IT
Ash & Tim Lane

Panthera brush aside the stereotype of the typical accountant

We got in touch with Panthera Accounting by way of a recommendation; we haven't looked anywhere else since. They are an extremely professional yet relaxed group of people. We were slightly daunted by the idea of accountants but Panthera brushed aside y the stereotypes. They are very understanding when answering any questions we may have. They are completely efficient, offer sound business advice, and are fantastically priced. We will continue to recommend them.

Ash & Tim Lane Starveacre Fencing
Jayne Johnson

An Asset to my Business!

The whole team at Panthera are great! Working with them has been a huge support to my growing business. They help me to understand the numbers I need to know. They give me technology solutions like Xero so that I can process things quickly and have access to my own figures. They are quick to reply, highly knowledgeable, nothing is too much trouble and as well as making sure that everything is compliant and on time, they are enthusiastic, professional and fun to work with.

Jayne Johnson Better People
John Baker

Absolute joy - they provide a first class service on every level

Working with Tory and the team at Panthera is an absolute joy - they provide a first class service on every level; from simple Xero issues through to more complicated tax enquiries, they’re always on-hand to help me get it right. I’m certainly not their biggest customer, but I’m always made to feel like their most important one.

John Baker BKR Solutions
John Castle

Professional and Friendly

I would like to say that Panthera Accounting have helped me with my business accounts for more than 4 years now. They have consistently offered an excellent competitively priced service that works both professionally and in such a friendly way that I would highly recommend them to everyone considering using their services.

John Castle Ilexanna Limited & Birch Castle Homes Limited
Jonathan Morrison

They are always there to answer queries and sort out issues

I had been with Mr Dunn for 20 years when upon his death Panthera took over the business. They now play a bigger part in the running of my business, they do all the stuff that has to be done but I don't like doing ie book keeping, VAT, wages, and returns. They are always there to answer queries and sort out issues and make sure all Tax deadlines are met. Their costs are fair, service is great and I have and would highly recommend them.

Jonathan Morrison Wallingford Builders
Pippa Scott

Professional, friendly and personal service.

Panthera Accounting have gone above and beyond the call of duty to guide and support our Company. They offer a professional, friendly and personal service that can take the stressful and sometimes frightening feelings out of running a business. They have guided us through the working of Xero and have offered “teaching sessions” on the day to day running of the accountancy package. Our only regret is that we didn’t join their team earlier.

Pippa Scott Scott's Commercial Services Limited
Sara Southey

Panthera puts the personal back in to accountancy!

Tory and her team have provided a friendly, approachable and helpful service from the start. They have delivered a quality service, above and beyond anything I could have expected. Panthera, with the help of the Xero package, have taken the stress, strain and confusion out of managing my company and personal accounts. I look forward to working with them for many years to come.

Sara Southey Bluestones Garden Design
Tracey Miller

Panthera are fantastic.

Panthera are fantastic. Always professional, going the extra mile for their clients and delivering superb service. I recommend them all the time to my clients.

Tracey Miller Bigger, Brighter, Bolder BBB

Contact Us

Panthera will use the details that you have entered into this form to communicate with you on the subject of your message, and for no other purpose.
Please see our privacy policy for more details on how we manage your data.

Lets Get Started

Not Currently A Client?

Moving to Panthera is as easy as 1,2,3...

  1. We jump on a quick call to create the perfect service package for your business
  2. You e- sign your terms of engagement
  3. We get your authority to talk to HMRC on your behalf

And that’s it! From contacting your previous accountant, to updating Companies House with your new registered office address, let us handle all of the admin so that you can get on with running your business, safe in the knowledge that everything is going smoothly in the background.

Talk to Us