• Business Growth & Optimisation

Budgeting for Business Owners: 8 Common Mistakes to Avoid

6 min. read06.08.2021
By Team Zeller

Every successful business needs a budget.

Running a small business with great success often hinges on executing a well-curated business plan. One of the most crucial elements of small business finance and an effective business plan is implementing a solid budget.

When you take time to create a financial roadmap for your business, it will serve to navigate you through each financial year so you don’t end up in financial stress. A good budget plan will keep you organised and help you make savvy financial decisions that benefit your business.

It’s important, however, that you know how to avoid some of the most common budgeting mistakes that land small businesses in hot water. In this article, we will explore what these mistakes are and how you can avoid them.

Mistake 1: Reusing last year’s budget plan

Many business owners allocate time to review their budget and plan for the year ahead just before the start of the new financial year. While it’s normal to use your existing budget as a guide for establishing the next one, be careful not to cut corners by simply reusing the last plan as your new budget plan.

It may seem convenient and time-saving, but in the long run this strategy is unlikely to be advantageous to your business. In the space of an entire year, your business has evolved, for better or worse, and has been exposed to a different financial climate. From pandemics, to recessions and even natural disasters, there are a range of influences that need to be taken into account each financial year.

Spending habits shift in this period too. You may have more or fewer expenses, or a larger or smaller income. All these factors need to be considered in your upcoming budget plan in order to maintain an accurate and realistic budget that is relevant to your current situation. Knowing the nuances will help you determine where you can cut the fat to increase your profit margins.

When putting together a new budget it’s a must to analyse last year’s plan, but ensure you update it adequately to reflect your current business circumstances, rather than replicate it entirely.

Mistake 2: No business strategy

A budget is important, but without a solid business plan in place you’re flying blind. A business plan is the path that leads to your growth, where you outline your business goals and map out the steps you need to take to achieve them. You’ll also determine how much money you need to spend to reach your goals.

If you want to refresh your business strategy or are just getting your business started and aren’t sure how to create a business plan, read our guide on How to Write a Business Plan.

Mistake 3: Low prices

Many new business owners are keen to get the edge over their competitors. One way they attempt to attract customers is by beating their local competition on price.

If you already have tight profit margins, then this strategy is going to cause your business financial strain. Not only that, but you might find customers avoid you if they view your prices as being indicative of the quality of your products or services.

If you’re re-thinking your prices or just getting your business started and aren’t sure how to set your prices, read our blog on Retail Pricing Strategies.

Mistake 4: Spending too much, too soon

Starting up a new business takes a lot of time and energy. When money does begin to come in, it’s exciting — your hard work is paying off. It can be tempting to start spending money as soon as you start receiving revenue. However, it is often a wise move to spend slowly and focus on building up a financial buffer first.

Reinvesting is a good business strategy, but prioritising debts like business loan repayments and establishing an emergency fund will keep your business in a strong position.

Mistake 5: Underestimating expenses

When it comes to small business finance, expenses can stack up at an alarming rate. Don’t underestimate these costs. Be realistic with your budget forecast and ensure you keep track of all your upcoming expenses and any price changes that could be on the horizon, such as changes to the cost of:

  • materials

  • rent

  • labour

  • travel

  • advertising

  • equipment

  • shipping, and more.

If you want to save money, examine all your expenses and look for reasonable ways you can do it for less. For example, a portion of your takings will go to merchant fees. Some merchant services providers charge variable transaction fees, depending on the card used by the customer. That makes it difficult to forecast your transaction fees at any point in time, meaning you’ll probably be paying more than you expect.

Zeller Terminal accepts every card payment for one low fee of 1.4%, whether tapped, dipper or swiped. There are no hidden charges or fees, so you won’t find any nasty surprises in your merchant statement.

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Mistake 6: Slow cash flow

Late invoice payments negatively affect your cash flow. It reduces your own ability to pay bills and suppliers, and can leave you in a pile of debt. When you’re creating your budget, keep an eye on the patterns of your cash flow and how they influence your business performance.

If you find yourself paying for products well in advance of the date that your customers purchase them or pay your invoices for them, then you will need to plan accordingly to cover yourself for these in-between periods.

Struggling with customers that don’t pay on time? Read The True Cost of Late Payments (and How to Reduce it).

Mistake 7: A one-sided plan

When creating a business budget, it’s necessary to cover all the angles. To be fully prepared, it’s ideal to create at least three different scenarios in your plan. By doing this you can envision the different financial directions your business could go, and be ready to act should any situation arise.

It’s important to have a good understanding of what your key drivers are and how they can influence your business results. These include, but are not limited to, your sales volumes, profit margin variations and pricing changes.

When you know your numbers, you can set up different scenarios. For example, you can ask yourself questions such as, “what would happen if my sales went up by 15%?” or, “what if I lost my biggest client?” Cover as many variables as possible to see what outcomes they would lead to so you can be prepared to resolve any problems that come up quickly and easily.

Mistake 8: Forgetting to monitor it

It’s essential to review your budget frequently. Many businesses create a budget, and then forget about it entirely, wasting their precious time and a golden opportunity in the process.

When you regularly monitor your budget, you’ll not only deepen your understanding of what needs to change or be improved upon for future budgets, but you can also track your actuals against your forecasts. This will help you determine whether or not you’re moving closer to your goals, or whether you might need to change tack.

Budgeting for business owners can be a time consuming process but the benefits are numerous and will serve to help you reach your business goals. By avoiding the common mistakes many businesses make, you will be well prepared for any situation that may arise.

For more tips on how to achieve success in your business, sign up to our Business Blog.

8 Small Business Money Management Tips

Here are a few simple steps to streamline the way you track your daily business expenses. Many merchants struggle to keep finances in order. Small business owners tend to wear multiple hats — from operations to HR, marketing and finance. There’s a lot to take care of, and it’s easy to understand why financial admin can slip to the bottom of the pile. Yet there are lots of good reasons why you should be tracking your business expenses. Aside from reducing the cognitive overload come tax time, keeping on top of your expenditure can you better manage cash flow and make informed, profit-building decisions for your business. Read on to discover some small steps you take as part of your day-to-day routine to keep on top of your business expenses. 1. Store your receipts properly Maximise your deductions at tax time by being diligent with retaining and documenting your receipts — your accountant will thank you. Keep your paper receipts in order by recording them in your accounting software, and then storing them systematically in the event of an audit. If you have a lot of paper receipts, consider converting them into digital formats (either by taking a photo or scanning them) to save on storage space, and prevent your receipts from fading or deteriorating over time. Alternatively, ask vendors to send you digital receipts via email or SMS — which is a money saver for them, and a space saver for you. Store your digital receipts securely, so that you can retrieve them as required. Just make sure that your system is backed up to avoid any heart-dropping mishaps. Most accounting software has the ability to attach the electronic receipt to the entry in your ledger, which makes it easy to search and retrieve the receipt as required. Zeller Dashboard tracks expenses in real time, and has a handy search function so that you can find specific transactions when you need them. 2. Open a separate business account Maintain a clear line between your personal spending and your business expenses by opening a separate business banking account — it’s one of the easiest ways to keep an eye on your spending. There are many good reasons why having a separate account is good for your business; it saves time, makes reconciling your expenses simpler, and it gives you greater visibility of what’s happening with your finances. It also means that you don’t have to explain your personal spending decisions to your accountant — or anyone else — come tax time. 3. Let accounting software do the heavy lifting Modern accounting software is more than a spreadsheet, it’s a complete system designed to keep you on track financially and save time. As such, there are many tasks that can be automated to reduce the amount of time you spend on bookkeeping. Most cloud accounting systems have the ability to connect directly with your bank feed, which updates your financial transactions in real time, and makes reconciling expenses a lot easier. Set aside a regular time each month, or more often if you have a lot of transactions, to go through your records and reconcile your expenses. If you use an expense tracking app throughout the day, your accounting software will intuitively match your bank records to the entry, and you’ll have minimal work to do. If you need help deciding which accounting software will meet your accounting requirements, read How to Choose The Right Accounting Software For Your Business . 4. Review your suppliers annually Brush up on your negotiation skills and you could save a few dollars. While some expenses may appear to be set in stone, in reality, there is usually room to negotiate to get a better deal for your business. Utility companies update their plans and pricing on a regular basis, so make it a priority to contact them every year to see if you’re on the best plan for your needs. Also consider bundling services, like your work phone and internet, to get a better deal and save. Loyalty can go a long way when it comes to negotiating with suppliers. If you’ve been trading with someone for a long time, keep an open dialogue with them about your needs. Most small business owners are prepared to be flexible in order to keep a loyal customer. And remember, not all negotiations have to be about money. You might not be able to barter on the price point, but you might be able to secure faster delivery at no extra cost — which may not save you money, but will save you time. When it comes to automatic contract renewals, make a diary note to review your contract two to three months before the renewal is due. This will give you time to advise your supplier if you find a better deal, and choose not to renew. Another approach is to negotiate the terms at the beginning of the contract. If a contract calls for automatic renewal, ask your vendor for an amendment to the terms giving you the option, not the obligation, to renew your contract within a window of time. 5. Wherever possible, fix expenses Expenses fall into one of two categories: fixed or variable. Fixed costs remain the same, irrespective of your volume of business. This may include things like rent, plant or machinery purchases, business registrations and insurance. The benefit of fixed costs is that they can be anticipated, and the expense accounted for. In contrast, variable costs can change depending on business needs, and may include labour, raw materials and utilities. While variable costs offer flexibility, they can also put your business at risk of overspending if not managed appropriately. Purchasing equipment or machinery outright is one way to fix your costs. Leasing tools can make it easier to get up and running, but will likely cost you more in the long run. By investing in your own equipment, you can reduce ongoing payments, which is good for your business cash flow. 6. Reduce your reliance on invoices For some industries, preparing and sending invoices, and giving clients payment terms, is regular practice. However, relying on invoices can mean a delay in getting your money. Reduce your risk, and the administrative burden of chasing up unpaid invoices, by transitioning to upfront payments, or collecting payments on job completion with a portabl. This will reduce the number of defaulted or delayed payments from clients, and get that money in your account a lot faster so you can focus on growing your business. 7. Keep your income and expenses up to date Regularly reconciling your expenses is one of the best ways to stay abreast of the financial health of your business. Knowing your numbers, whatever they may be, is critical for running a successful business. Achieving this also means knowing exactly what and how you’re being charged for each business service, including for the provision of EFTPOS services by  your payment provider . Seek out a provider who is open and transparent about costs, with no hidden conditions or fees. Better yet, look for a fixed transaction rate, and no account-keeping fees or ongoing equipment rental. At Zeller, we provide full transparency for our customers, with flat rate transaction fees and no ongoing costs. Our full-featured dashboard also allows you to check your numbers at any time, giving you 360 degree visibility of what’s going on with your business — from real-time transactions, profit comparisons, a summary of tax obligations and any refunds transactions that may require your attention. 8. Get professional help Investing in the services of a professional accountant can help maximise your savings and minimise your tax liabilities, yet the true value of an accountant comes from bigger picture thinking. A good accountant can also help you grow your business, by providing guiding advice on when to scale up and how. And while your accountant handles the financial details, you can focus on the building your brand and your customer base. An accountant should be a trusted partner in your business, so it pays to shop around to find the right person for your circumstances and ambitions. Finding a reputable practitioner is important, so ask around for recommendations of capable candidates from others in your industry. Other questions to consider are: What services do you need? Is this their area of expertise? What accounting software do they work with? What costs do you need to consider? Finding the right accountant is like finding the perfect pair of shoes. Once you’ve found the right fit, you’ll feel fully supported and ready to take your business to new levels. Keeping on top of the financial health of your business is one of the best things you can do to nurture a profitable and sustainable business. Managing your expenses may not be the most thrilling job in the house, however it can be one of the most rewarding. Appropriately managing business expenses will also have one of the biggest impacts on your bottom line, so it pays to embrace it with good practices and an optimistic outlook.

How to Find an Accountant For Your Small Business

An accountant is an invaluable asset for your small business. As a business owner, maximising your tax offsets (and paying the right amount of tax) is vital. That’s why it’s important you find a good tax accountant early on — otherwise, you could end up paying more tax than you have to, or not enough. An accountant is a professional who takes care of your business’s bookkeeping and prepares important financial documents such as balance sheets, profit-and-loss statements, and more. However, the best accountants don’t just crunch the numbers — they add value to your business. An accountant can give you strategic advice and think of out-of-the-box ways to save your business money, and grow profits. You just need to choose the right one. The difference between bookkeeping and accounting When choosing an expert to be involved with your business’s financials, you need to ensure you are clear on your growth goals. Some business owners choose to engage a bookkeeper instead of a registered accountant, often to save money. However, there are some important differences to be aware of. Bookkeepers record the day-to-day financials of the business —  payroll, invoicing, and transaction records, for example. Accountants, on the other hand, are more focused on budgeting, forecasting, running financial reports and statements, and working on your business’s tax returns. As a business owner, having an accountant as part of your team is imperative for the long-term success and growth of your business. Finding an accountant for your small business Step 1: Create a shortlist With so many accountants available, it’s important to research your options. You’ll want to find an accountant who understands your business, the type of products and services you offer, and who will be able to help with your growth strategy. You should also consider a few factors such as location, workload, type of accounting software, fees, and their reputation in growing other businesses. These days, location is not as important as it once was. Virtual meetings and cloud-based accounting software have made it easier for both accountants and their clients to view real-time data, eliminating the need for you or your accountant to be located in close proximity. This is great news for small business owners: if your accountant can be located anywhere in the world, then you can find one that understands the mechanics of your business. Once you have a rough idea about the type of accountant and accounting services your small business requires, the next step is to compile a shortlist of accountants that will fit your business’s needs. Consider asking your network for recommendations, and spend some time searching online. There are various online directories you can search including: Institute of Chartered Accountants in Australia Institute of Public Accountants Certified Practicing Accountant of Australia It may be a tedious task, however it’s an important one to ensure your business thrives. Step 2: Interview your options Now that you have your shortlist, it’s time to contact each option and learn more about how they run their business. There are four key considerations in determining which accountant is the best fit for your business’s requirements. 1. Experience and specialisation Do they have experience in dealing with similar businesses to yours? Find out what type of clients they’ve dealt with in the past; the size of the businesses, any industry-specific software they’ve used, and how they’ve helped other businesses grow. The more familiar the accountant is with the ins and outs of your industry, the better for your business. An accountant with a good understanding of the intricacies of your business will be able to make recommendations that are align with your business strategy. 2. Communication style While not technically part of your staff, your accountant will be a key team player in your business. Yet in order for your business to benefit from their expertise, the lines of communication must be open. The success with which you and your accountant communicate will be a big factor in the success of your partnership. As Albert Einstein said, “The hardest thing in the world to understand is the income tax.” If you agree with this sentiment, you’re in good company. The accountant you choose needs to be able to cut through financial jargon and explain difficult concepts clearly and concisely, as well as respond to your calls and emails in a timely fashion. Think about how you will communicate with your accountant. You might consider granting them secure third party access to your Xero organisation, and making use of Zeller's integration with Xero Bank Feeds , for example. It’s also important to consider who would step in if they were to go on holiday, or fall ill; do they have a team of professionals who would be able to assist you? Communication is a vital part of running your business, so set your expectations from the very beginning. 3. Proactivity The best accountant for your business will do more than simply lodge a tax return and manage your business accounts. They be will be proactive, helping you to identify quick wins as well as plan longer-time cost-saving initiatives. So, how do you find the best accountant for your business? It’s simple. Ask them what they would suggest to save your business money. Their response will allow you to gain an idea of just how much work they are willing to put in. “The worst accountant to have is the one who just says 'yes', 'no', and 'it depends'. The accountant you want is the one who asks open questions: who, what, when, where, how, why. A good accountant will enquire about the type of work you do, and make smart suggestions based on that,” says Duncan Perkins, owner of Tax Time. However, in order for your accountant to be proactive, they must be kept informed of important business decisions and aware of plans for future growth. This is where many small business owners miss out. “A lot of people see their accountant as a machine to get a task they hate out of the way,” says Duncan. “They’re scared to ask questions, because if they do they think it’s going to cost them a couple of hundred dollars to resolve something that may only save them a very small amount. But a good accountant will help you stop focussing on the little things, like $10 deductions, and start looking at the bigger picture — so they become more of an advisor.” 4. Cost Find out what additional costs are associated with the services provided. You’ll want to know upfront what the expense will be to your business, and if payment plans are available. Ask what’s included in the accountant’s fee and what’s considered an additional cost. Keep in mind that, whilst accountants can take care of the entire financial side of your business (including bookkeeping), this might not be the best approach for you. As most accountants charge by the hour, you’ll likely want to maximise the time you’re paying for instead of paying for simple tasks such as bookkeeping and paying invoices. For that, you could engage a bookkeeper or find accounting software that will simplify tasks like invoicing by sending automatic invoices and recording their contents. If you handle the simpler tasks, it will allow your accountant to deal with the more complicated tasks like forecasting, bank account reconciliation, lodging tax return forms, payroll, and capital depreciation calculations. Your accountant will be intimately involved with the operations of your business, so finding the right person for the job is important. When it comes to finding a good tax accountant, you’ll need someone trustworthy, that has experience with similar businesses and has clear and concise communication with their clients. Remember, you and your accountant operate as a team. The accountant you choose should help your business grow, offer sound advice on business issues, and save you money both in the long and short term.

3 Accounts Every Business Owner Should Have

Each account is a financial tool with an important role to play. Money management is a skill that can take time to master. However, no business owner can afford to let this one slip through the cracks. Keeping a close eye on your incomings and outgoings from the outset is critical to keeping doors open. One of the simplest and most effective techniques to effectively manage your money is to set up three separate accounts: operating account tax account profit account. Each account has its own purpose. By keeping your funds in separate accounts, you will always have enough money on hand to carry you through quieter periods, take care of your tax obligations, or spend in case of emergencies. When you sign up for Zeller, you get a free Zeller Transaction Account . Setting up multiple Zeller Transaction Accounts is simple, and can be done in seconds. What is a business bank account? A business bank account is a facility that protects a business’s capital while enabling it to spend its funds. You’ll use a business account to receive payments from customers, fulfill invoices, track business expenses, and generally keep your accountant happy. A business bank account is not a personal account. For tax and bookkeeping purposes, banks, accountants and payments providers strongly recommend that merchants separate personal from business funds in separate accounts. To open a business account, business owners used to need to gather their documentation together, visit a bank branch in person to meet with a representative, and then send various forms via fax, postal or electronic mail. Eventually, you’d receive a card and checkbook in the mail. Instead, you can sign up for a free Zeller Transaction Account in minutes. A  Zeller Terminal can be purchased from the online shop , with free express shipping and same-day dispatch. Funds accepted via Zeller Terminal will be available in your Zeller Transaction Account for spending, the very next day, or you can simply use Zeller as your primary financial services provider without taking payments through Zeller Terminal. When comparing business accounts, it’s important to spend time on working out what’s important to you and which features your business needs. Read our blog about opening your first business account. 3 important accounts to open There are three basic business accounts you should consider opening. Of course, there are more sophisticated ways of managing your funds; you could be pouring over your budget every day. However, for simple and straightforward money management, keep reading. Zeller merchants can set up multiple sub-accounts to tailor their funds management to fit their unique business set-up. Not only does this give you a better overview of your business's finances, it also gives you the ability to more easily manage your money — with quick and seamless transactions between your main and sub-accounts. Here are the three accounts every small business owner needs. 1. Operating account The first account you’ll need is your operating account. Your operating account is where you run the day-to-day operations of your business. It’s where you: receive your income pay your bill pay your wages and so much more. Basically, all your day-to-day cash inflows and outflows go through this account. Most businesses should have one of these accounts already. For most Zeller merchants, this will be your Zeller Transaction Account . Funds are collected from your Zeller Terminal , settled and cleared into your Zeller Transaction Account overnight — so they’re available for spending the very next day. It’s the fasted way to get access to your takings and speed up your cash flow. Sign up for Zeller and you could have your Business Transaction Account in less than five minutes. Once your account is set up, stop using cash and do all your transactions electronically. If you’re paying suppliers in cash, it’s easy to lose track of the payment. If you pay electronically, you can always find a record of the transaction — ensuring you don’t miss out on claiming GST (if you are registered for it), or other tax deductions. Bigger businesses may choose to use a traditional bank for their operating account, because they offer overdraft facilities (subject to approval). These banks likely charge a monthly fee for the service. 2. Tax account The second account that you’ll need is your tax account. Your tax account is where you start putting money aside for tax. By separating it from your operating account, you will be less likely to spend it. It's easy to accumulate funds in your account, forgetting that at some point down the line there's tax to pay. Entrepreneurs and business are legally obliged to pay a number of different taxes, such as sales tax, trade tax, income tax, and wage tax. When you first start trading, you’re not paying tax on your earnings. But the year after you lodge your first tax return in net profit, you get a tax bill for that year — plus all of a sudden you also have to pay PAYG installments. Depending on which type of tax you pay, you will be required to make specific quarterly or monthly payments in advance to tax authorities. These advance payments help your business to budget and plan ahead, by spreading the business’s tax burden over the entire year. If you set aside money in a sub-account on a regular basis, it can help to make sure that you have sufficient financial resources available to pay your taxes on time. Each week or each month, start to put money aside money that will cover your obligations such as: Good and Services Tax (GST) Pay As You Go Tax (PAYG) superannuation income tax, and so on. 3. Profit Account Finally, the third account you’ll need is a profit account. This is where you put money aside for the profits of your business. So, as your business makes a profit, simply put a portion of that money aside. Again, if you leave it in your operating account, it’s far easier to spend. But if you put it aside in your profit account, it will be available when you want to make any changes in the business. This could be things like: paying out dividends purchasing new tools or assets for your business reinvest in the growth of your business giving all your staff a bonus investing in additional COVID-safe measures. The beauty of starting to manage your money this way is that you’ll be able to start choosing where you spend your accumulating profits, rather than your takings being simply absorbed in the day-to-day operations. Set these three accounts up today and use them frequently — you’ll soon find that you’ll have the money that you’ll need to scale your business. Once your business grows, it’s a good idea to look for a high-interest business savings account. This will let you earn interest on extra funds that you don’t need right now; effectively, it’s another revenue stream as it allows you to make money on business assets. Introducing smarter business banking With Zeller, you can accept payments from customers, track spending and manage your business's finances online. It’s an all-in-one solution for merchants looking for the most straightforward way to start or grow their business — no hidden fees or lock-in contracts required. In Zeller Dashboard , you can see: details of every sale the number and value of sales your business has made at any point on time where business funds have been spent account totals and so much more. By putting valuable insights at your fingertips, we hope to enable Zeller merchants to be able to make important business decisions with ease. Sign up to the Zeller Business Blog for more business tips delivered straight to your inbox. Please note this article is for educational purposes only and does not constitute advice.

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