Saturday, July 13, 2024

Guide to Budget Issues and Comprehensive Planning for SMEs

In today’s business world, SMEs face many issues – including producing a comprehensive budget. Financial management is crucial to the success of your company, and you must have great knowledge of your company cash flow and the specific industry of your SME. Without this detailed information, it could spell failure and even the severe consequences of company insolvency. Business Rescue Expert, leading insolvency practitioners in the UK, are sharing their tips to budget planning for SMEs.

According to the Insolvency Statistics – October to December 2017, the number of companies entering insolvency increased by 4.2%, compared to that of 2016. An estimated 17,243 UK companies faced the insolvency process, with even more businesses expected to enter the formal proceedings next year. For many, this will be the result of poor financial management. Managing growth, change and funding are said to be a primary issue for SMEs, stated in recent reports. Without a realistic and adaptable budget in place, you cannot plan for a healthy and profitable future.

Sales Estimate

For businesses that are already established, a comprehensive look back at previous sales is essential for your budget plan. Take a look over the past several years to produce an in-depth forecast, including specific times of the year – peak periods, seasonal periods etc. This data will provide an extensive insight into where you succeed in revenue, and where you need to improve financial planning.

As a startup SME, existing consumer data will not be readily available. However, you can analyse your competitor’s accounts and successes, filed at Companies House. In turn, this will allow you to understand the market and enable you to make any necessary changes to your budget. You should also look into purchasing an industry analysis from a data research tool. There are plenty offering free services, and you could look into the likes of Plimsoll to provide a basis for your sales estimate and, subsequently, company budget.


It may seem like we are stating the obvious, but all expenses need to be taken into account. This also includes one-off purchases, such as licensing or software, that may seem insignificant. All financial information available will create an accurate budget.

Again, if you are a startup, this information can be found online. Research your competitors and their online accounts to analyse the time before your company is expected to make a profit. Industry standards and marketing trends will also work as a guide as you produce the budget. A specialist accountant within the industry will have expert knowledge of your specific market, so it may be worthwhile looking into their services.

Peer Groups

Connecting with peer groups within your industry provides endless benefits. You can build your network and relevant connections to aid with the growth of your business. Staying active in these peer groups will ensure you collect vital information for trends in the market, while identifying any changes that impact your sales and budget.

Match your Headings

You can work to create a realistic budget with the costs and insider industry information available. However you find this information, whether from your existing consumer database or research accounts from competitors filed at Companies House, you must ensure your budget income and expenditure subheadings match up exactly with the layout of your company’s management accounts. To do so, you can use the services of cloud based systems, such as Xero and Quickbooks, boasting excellent facilities to help prepare the initial budget draft. Once these are in order and aligned, you can regularly compare costs with your budget and amend efficiently in response to any market changes that could affect your cash flow.

Seek Advice

Advice is essential to getting your SME budget off the ground and into a realistic plan. Established companies boast the benefit of staff members with financial responsibilities, meaning you can gain insights into their day-to-day knowledge of the cash flow, as well as information on targets, costs and production. These additional insights will only strive to strengthen your budget and, most importantly, make it achievable.

If you are struggling to put together a comprehensive budget, financial advisors, accountants and even business mentors can share vital knowledge and review the draft of your budget. Again, these services will not be free, but can mean the difference between a successful future and, possibly, insolvency.

Ultimately, creating a budget taking into account all factors will help improve your chances of making a profit.

Elliot is the Editor at ABCMoney. He manages a team that writes and contributes to many leading publications across a number of industries.

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