As a small business owner, it’s important to know, understand, and track the numbers that impact the success of your company. A business budget provides vital numbers that outline your revenue and expenses and can identify areas of cost savings or overspend. A budget can also be used to inform financial decisions you need to make for your company.
Before you can create a budget, you need to know where your business stands financially. Start by gathering information related to the financial history of your business which includes all monies coming into and going out of the business whether paid with cash or electronically. This will give you a better understanding of what your fixed and variable expenses are. Fixed expenses tend to cost the same over time and include items like rent, leases, payroll, utility bills, and insurance. Variable expenses can change from month to month and include marketing, travel, office supplies, shipping, and subscriptions.
Once gathered, input your financial information into your budget spreadsheet or template. Some numbers will fluctuate so you may need to do some estimating, especially for items that occur seasonally and for one-time expenses. You should also use this time to set financial goals. Think of any projects that may bring in additional revenue or require extra funding. Remember to look for areas in your budget where you can adjust for cost savings.
Once your budget is set up, you’ll need to manage it closely by tracking your financial transactions and comparing them to what you entered into your budget. This comparison of budgeted costs vs. your actual costs allows you to stay ahead of any potential issues before they become major problems down the road. Tracking should be done monthly so you can make necessary adjustments to your budget throughout the year.
Using a budget will help ensure that you meet the financial goals that you’ve set for your business. It shows you where you can save money as well as opportunities to increase your revenue. If numbers are just not your thing, you can seek help from an accountant, bookkeeper or small business coach.
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