Sticking to a budget is no small task, especially for a small business, but by taking the time to intentionally and intelligently craft an annual budget, collision repair shop owners can improve their bottom line, while making way for change.
Best-selling author Ramon Ray, founder of Smart Hustle Media, a company that educates small businesses, says one of the first steps to organizing your budget is understanding each of your fixed and fluctuating costs. Fixed costs include items like rent and phone bills, whereas fluctuating costs may include employee hours or electricity bills.
Learning the facts and figures of your business is paramount because, as Ray says, “Numbers tell a story.”
Here’s how to know yours.
As told to Maraya King.
Shift Your Perspective.
One of the biggest barriers to budgeting can be your mindset, and that’s why we encourage our clients to shift their perspective. Don’t think of budgeting as restrictive, instead, frame it as though your budget gives you permission and lets you know what you can spend.
Budgeting doesn’t have to have a negative connotation, and shouldn’t, because it is setting your business up for success.
Run your business through software.
Each of our clients know how important it is to track your financials. Pocket-sized ledgers can be tedious, so we recommend using a dedicated business software. Whether you use Quickbooks or XERO, you should be running your financials through software that knows the income and expenditures of your business.
In order to craft a budget, you need to know what’s coming in and what’s going out. That’s why we recommend using a financially intelligent software that allows you to pay through its platform.
Categorize your income.
Once you’ve got your software down and have an idea of your profit and loss statistics, it’s time to categorize the profits. By categorizing your income, you can see where you should do more investing and where you should do more marketing.
You could categorize your profits by product, service, or even automaker, then you will be able to quickly draw insights, notice patterns, and maybe even identify potential holes in your business model.
Let’s say you discover that bumper replacements are making you the most money. At Smart Hustle, we would recommend that your shop run an ad campaign for bumper replacements to bring in even more business.
Examine dollars and percentages.
One reminder that we like to give our customers is to examine their financial statements in terms of percentages, as well as dollars. Looking at the percentage as opposed to dollar amounts helps to put your expenses into perspective, rather than focusing on individual payments.
For example, say you spent $50,000 on marketing this year—is that 10 percent of your budget, or 80 percent?
Schedule calendar check-ins.
One of the most important aspects of budgeting is staying on track. That’s why we advise our clients to set check-in dates to ensure they are on track, and offer an opportunity to adjust when necessary.
The first type of check-in is monthly. For a monthly check-in, do a light overview to make sure your invoices are going out, checks are going through, and customers are paying you.
Quarterly check-ins are when you should look at your numbers in detail. Make sure your business is being reimbursed in a timely manner and reach out for outstanding fees.
End-of-the-year check-ins are the most taxing, which is why we advise our clients to meet with a financial adviser. Review how the last 12 months went, fill out taxes, and get a headstart on crafting the next year’s budget.
Study, then store your files.
Whether you prefer to keep your information in the cloud or in a safe, we recommend you keep a running record of your business’s financials over the years. More often than not, documentation will be baked into your business’s software, but make sure it doesn’t go underutilized.
Not only can documentation help during tax season or with an unexpected audit, but it contains a lot of answers. We teach our clients that numbers help to tell a story so you can grow your business, year after year.