Managing the cashflow twists and turns of a project can be hard work, but it may be easier when you have an agreed budget and can track your spending and performance. If you want to grow your business while stabilising your finances, then working to budgets isn’t just a nice to do, it’s a must do!

So, what’s the best way to stay in control of the budgets you’ve set? And how can you manage your cashflow position to make sure there’s always enough cash to fund the project?
 
Understand the costs of each project
Starting a project without fully understanding how much it will cost is a no-no. To keep on top of costs, overheads, staff expenses and general spending, you need at least a ballpark figure for this expenditure. In an ideal world, you’ll want to be as precise as possible with these costs.

Run through the project from start to finish and highlight every point where you’ll incur costs. It might be the cost of raw materials. It may be the cost of buying new equipment. It could be payroll costs for people actively working on the project. Break everything down and come up with a total expense for the project. This is your starting point.

Set your budget and track it over time
Once you know the project’s baseline cost, you and your team should decide on the amount of funds to allocate to the budget. Your baseline cost is a starting point, but don’t forget to include extra for specific contingencies. What if the project overruns? What if your raw material costs go sky high? What if you need more people to get the job over the line?

Agree on a clear budget and set up your finance system to track spending against this. With a cloud accounting system at the heart of the business, it’s easy to create a budget and then record and track your spending over time.

Keep a close eye on budgets and project cashflow

A budget is not a static thing. You’ll obviously aim to stick to your initial costs, but prices and availability will affect the total spend over time. Because of this, it’s vital that you don’t just write the budget and then forget about it.

Keep a close eye on your budget performance and the cashflow for each project. Being able to review this performance, in real time, should help you avoid overspending or running out of cash for the project. If cash in the kitty is getting low, you can get proactive and look at ways to top up the budget, or rein in spending in other areas of the project.

Take action to maintain your positive cashflow position

Balancing the cashflow scales on a project isn’t easy. But when you spot a potential hole in the budget, the important thing is to do something about it, pronto!

Running any project with your fingers crossed that ‘it will all work out in the end’ is a recipe for disaster. And the availability of detailed budget reports and cashflow forecasts in today’s finance apps means there’s no need to be disorganised about your spending.

Think about:

• Setting up key metrics for each project, to measure spending, cashflow and progress
• Running worst-case and best-case cashflow scenarios so you’re prepared for anything
• Regularly reviewing your spending and looking for areas to make savings
• Taking on finance facilities to plug any cashflow holes as they appear

If you’re thinking about scaling up your established startup, please do get in touch. We’ll help you build solid, workable budgets that can be easily tracked through your accounting system.