For many small business owners, Budgeting Season and Halloween go hand in hand as the most terrifying time of year.
Small business budgeting doesn't have to be like that. You can look at the upcoming budget as the Fall version of Spring Cleaning. Putting together the 2018 budget gives you a chance to sweep out unnecessary expenses in prune the revenue tree to make room for new growth.
You can take advantage of a tool built specifically for cutting expenses intelligently duing times of rapid change. It's decades old but just now enjoying a renaissance on the global scene. It’s called zero-based budgeting (ZBB) and many companies have used it to pare down their total cost structure by 25-30%.
ZBB is not just for big enterprises, even though it has given new life to firms like AB InBev, Boston Scientific, Kraft and Tronc (Tribune Publishing).
Small businesses can apply the same principles to dump what’s not working, align their costs more closely with strategy and operate like the lean, green, fighting machines that they were meant to be.
In essence, ZBB means starting from scratch and justifying expenses according to how closely they fit your market strategy.
Are you planning to automate and go digital to ramp up productivity? Make budget choices that promote that initiative. Are you going to hire aggressively and open a new location? Cut back on anything that slows you down. Is it time to dump your ancient phone system for a more mobile solution? This budgeting technique makes it easier to make those kind of financial decisions. It prioritizes rationality over politics and the status quo.
Under the old Cost Plus budgeting model, where you just modify your budget year over year, employees quickly develop a “use-it-or-lose-it” mentality toward their funding. Increases everywhere tend to become the default.
ZBB turns that around. It build incentives around creative problem-solving and innovation.
Master your fear of small business budgeting this year and follow these three steps to become a ZBB ninja.
Step 1. Hold on to the best of the old ways.
You don’t have to drag your 2017 budget into the Trash folder. If you have solid commitments and known quantities like payroll, carry them over into your ZBB 2018 Budget. Zero out and justify as much as possible, with a very brief tag for each expense explaining how it moves you closer to your stated goals.
Step 2. Bring all your stakeholders along for the ride.
Your employees may hate accounting, but there’s a fairly good chance they love saving money. Hold a brain-storming session on ways to do more with less. Ask your best customers, suppliers and any investors for their inputs, but phrase it as “ways to improve efficiency.” The words “budgeting” and “cutting costs” often tend to frighten off great ideas.
Step 3. Learn from the masters.
Until you get the finer points of ZBB down, it pays to have a financial professional or intelligent ZBB software in your corner. Here's a video tutorial on ZBB for Quicken to get you started.
Slash expenses by up to 88%
This time of year is also perfect for acknowledging that your employees most likely hate their desk phones. Market leaders in every industry have empowered a de facto field service. More than 72% of US workers be mobile-enabled by 2020, according to the IDC. You can’t compete when you’re stuck with an office-bound phone system.
Spoke helps you slash your phone system expense by up to 88% by compacting all the features of a traditional PBX into an app that employees will run their own phones. They are already using their phones for business, so keep your data safe and keep your employees productive with a solution they will use.