Why Every Small Business Needs a Budget (And How to Start One)

Budgets? Who needs them!

You do! 

At Sherpa Bookkeeping we believe that clarity is power – and that’s true whether you’re a café owner, a creative, or an e-commerce brand. 

So what is a budget?

A budget is so much more than numbers on a speadsheet. It’s your roadmap to business success - a strategic tool that tells you where your money’s going, helps you plan for the future, and gives you the confidence to make informed decisions. Just like your car’s GPS gets you where you want to go, a budget offers the same guidance for your business – in fact without one, you’re driving blind.

The big five

There are five key reasons why a budget is essential:

1. Cash flow control

A budget allows you to monitor your business income and expenses, and that helps to prevent the kind of overspending that leaves you short of cash and red faced when the bills roll in.

2. Informed decision making

Want to hire a new team member? Invest in marketing? Upgrade equipment? Your budget can help you assess when the time’s right financially for you to make the changes you need to drive your business forward.

3. Goal setting and growth

Budgets turn dreams into actionable goals. Whether you want to expand, increase profits, or reduce debt, a budget gives you the framework to make it happen.

4. Preparing for the unexpected

Life is full of the unexpected: economic shifts, supply chain issues, or unforeseen expenses. A carefully planned budget includes buffers and contingency strategies to help your business finances remain resilient and flexible. 

5. Peace of mind

Knowing your numbers will give you a better night’s sleep! You may have been flying by the seat of your pants up until now, but trust us when we say that a budget reduces stress and increases business confidence like nothing else ever will! 

The budgeting mistakes you don’t want to make

1. Budget? What budget?

Relying on gut instinct or past experience rather than a formal budget can lead to overspending, missed opportunities, and financial stress. 

Tip: Even a simple budget is better than none. Start small and build from there.

2. Guesstimates vs data

Using rough estimates and outdated figures can skew your entire budget, and not in a good way.

Tip: Base your budget on actual financial data, including historical income, expenses, and seasonal trends.

3. Ignoring irregular expenses

Annual subscriptions, insurance premiums, or contingency plans for equipment failure are often forgotten and not included in budget.  

Tip: Don’t get caught off guard. Plan for these by including a monthly allocation in your budget.  

4. Being too rigid

A budget should be a guide, not a trap. 

Tip: Unexpected opportunities or challenges will inevitably arise, so review and adjust your budget regularly to reflect real-time changes in your business.

5. Failing to track against your budget

You’ve created a budget – now use it! If you’re not monitoring actual performance, your budget loses its value.

Tip: Use bookkeeping tools and check in regularly to compare actuals vs. budgeted figures.

6. Underestimating costs

It’s tempting to be optimistic, but underestimating expenses can lead to cash flow issues.

Tip: To be safe, add a buffer to all of your expense categories.

7. Overlooking profit margins

Focusing on your revenue without considering your costs can give a false sense of success.

Tip: To ensure your business is as profitable as you think it is, track your margins closely.

8. Failing to involve key team members

Creating budgets without the input of key team members can lead to costly bind spots.

Tip: Involve managers or team leaders who understand day-to-day operations - they’ll offer valuable insights.

Budgeting with Sherpa Bookkeeping

We don’t just crunch numbers - we guide you. The Sherpa Bookkeeping team can help you to build a budget that reflects your values, supports your goals, and adapts as your business evolves. 

Whether you're starting fresh or refining your current budget, we’re here to help you move forward with clarity and confidence.