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“SMEs lack business financial management skills, so they need to look outside their business to obtain help,” says the SME Research Report 2017/18.
“Setting a budget is about becoming financially literate, which is an important skill. The better you understand your business finances, the higher chance you have at success in business,” says TAFE NSW management and small business teacher, Anthony Jones.
Anthony, who coordinates the Skills for Business program, says that small business owners without budgets struggle to reach growth milestones. Less understanding of cash-flow, he says, makes it difficult to implement strategic growth plans.
“Businesses without a budget often feel as though they never have the money to purchase what they need to run their business.”
He says hiring new staff, buying equipment or any marketing can complicate and confuse SMEs.
“Budgeting is critical to the management-planning process. Without one, you have no idea of upcoming expenses. A budget will ensure you don’t get stuck paying for items that can turn profit into loss.”
Anthony suggests that small business owners should regularly review and adjust their budgets, to help identify seasonal patterns for potential price adjustment decisions.
"Ideally, you are reviewing weekly and setting goals annually that incorporate seasonal trends."
A basic spreadsheet is a good start. A simple budget, says Anthony, is important, but ‘simple’ shouldn’t be confused with ‘inaccurate’. This is no time for guesswork, he says. Keep it real.
“Having a well-planned business budget mapped out like this can mean the difference between success and failure. And this is true whether the business is a sole trader or a larger company structure.”
"Taking the time to develop the skills and knowledge to create and monitor a financial budget is essential for small businesses.
"That and knowing your customers and knowing them really well; their needs and wants and what you have to offer to meet these needs.”
Know your customers better and lead your small business with Skills for Business by TAFE NSW - fully funded training for NSW small business owners and their employees, delivered entirely online, for your convenience.
Skills for Business also offers aspiring entrepreneurs an opportunity to complete the Certificate IV in New Small Business to give their business the best possible start.
Build your small business skills