Use budgets to unlock growth for small businesses

Guiding your small-business clients through the budget process can bring them – and you – many benefits.

A year ago I wrote that, although the budget process needed optimisation in today’s world, it was still a mainstay of modern business . And I cautioned that at budget time we shouldn’t treat it as solely the domain of the finance team. Budgets, and the strategic vision and goals that they map out, belong to the entire organisation. Finance’s role is to facilitate and steward the creation and reviewing of the budget on behalf of the company.?

This got me thinking about the small businesses I’ve been writing about for the past couple of months, and the discussion about how we, as accountants, can add value to these clients and their businesses. First I asked how we could be sure we are supplying numbers that count to our clients , and then suggested a way to help our clients manage lumpy income streams .?

Now, at budget time, I’d suggest that for many small-business clients, help with formalising – or even starting – a budget process might be one of the most significant things we can do to add value, drive their growth, build loyalty and, by extension, our revenue and long-term growth.?

Budget education?

But this necessarily starts with education. We’d need to first make the budget’s role in growth and success clear for our clients. Small business owners who are growing steadily, or even aggressively, but are still running their business off their bank balance will need to understand the benefits of starting to do a budget. This includes the advantages of considering various scenarios and then comparing their future performance against these forecasts and goals, rather than last year’s numbers.

We’d also have to educate our clients about the context and knowledge we can bring to the process. As well as our ability to create a budget in the first place, we can explain the implications of macroeconomic events on their business and how this should impact their decision-making.?

Of course, Pete the Plumber, Sparky the Electrician and Les the Landscaper know their business and craft inside out. But our knowledge, thanks to our qualifications and a career’s worth of business experience, enables us to shed light on the many visible and invisible factors that drive or inhibit company growth. We know about interest rates, inflation, the cost of finance and banking, and what these mean for the business and the decisions the business owner wants or needs to make. Crucially, we are aware of potential pitfalls in the path ahead for growing businesses – and so can help our clients avoid them.

Not for everyone

Of course, this is not for everyone and every business. If your small-business client is a one-person operation and happy to stay that way for the foreseeable future, they’ll likely see less benefit from elevating their financial activities with a more formal budget process. But if your client is hungry and ambitious, with plans to grow their small business into a medium or large one, it’s a different matter. They are ideally suited to benefit from increased fiscal discipline – indeed we almost have an inherent obligation to introduce this to them. Not only will this help our clients, but it positions us as an accounting partner who understands the journey they are on and can support them as they grow, and their financial requirements evolve.

No one size fits all

There is no one-size-fits-all solution. This is where your understanding of your client and their business needs to be married to your experience, skill and knowledge as an accountant. The budget support your client needs will depend on their business type, size, sector, location, business model and various other factors. It also depends on where they are in their growth journey. Our job as accountants should be one of trusted advisers who pre-empt each turn in the road and crossroads. We set our clients up to be prepared for the next step and are ready to assist them in making the right decisions.?

Creating value for your client

Having said that, the value of a budget is common to all growing businesses: it maps their strategic vision and goals onto a practical roadmap so they can measure their progress and correct their course when necessary. As a business owner, you should not be thinking about how you will grow in the future by looking at what happened last year. Instead, your clients need to be forward-looking and consider the impacts of the growth of their business given various scenarios – some of which you can control (do you buy that additional truck this year or next?) and some of which you can’t (the interest rate hikes, for instance) – on their profitability and their cashflow. A budget provides the roadmap and, as accountants, we assist with financial interpretation and guidance around decision-making.?

Creating value for yourself

A small or medium-sized enterprise (SME) budgetary advisory service, when required by the client business, creates value for them that will pay dividends for them into the future. It also transforms you from a number cruncher into a trusted adviser entrenched in their growing business – which can only pay dividends for your business in the future in terms of client retention and revenue growth.

Who knows, you may need to start revising your own budget assumptions to start planning for, and tracking, this as a potential new revenue stream.

As published in AccountingWeb - December 2023