Even though you probably have a personal budget, you may not yet have one for your business. However, a business budget is not something to overlook. If you don’t budget in your business, can you really guarantee that you will still be around in a year? Will you still be able to pay for your essentials such as rent and utilities?
Budgeting also allows you to make smarter business decisions. Budgeting and forecasting let you know how well your business is or isn’t doing so you can plan for the future.
If you don’t have a budget for your business, now is the time to start. Here are some tips to get started:
Know What a Budget Is and Is Not
When most people think about a budget, they think that you must account for every penny. However, that is simply not the case. Instead, think about it as a guide to help you develop better decisions when it comes to spending your money.
Take your time when setting up your budget. You are not going to be able to put your budget together in one day (or even a weekend). Instead, take your time and put some thought into it.
You need to be realistic when you are planning your budget. Go through your books and see what you spend on a regular basis. Start with your regular bills such as rent and utilities. Then, look at your other expenses. What is the average that you spend on them each month? Start there and adjust as needed.
It’s also a good idea to be a bit conservative when setting up your budget. It is important to have a little wiggle room for any unexpected expenses and slower months. Whether you budget for money to save or just consider it leftover money, it is important that you have extra money for the unexpected.
Once You Have a Budget, Be Flexible
Your budget is not set in stone. You might actually realize that your numbers were off. You might need to spend more money on advertising and less on something else. Update your budget regularly so that it continues to work for you, even as your business grows and changes.
If there’s a one-time expense, you should make a tradeoff for that month, instead of changing the whole budget. That being said, if you just need to spend a little more on your marketing this month, spend less on something else. You can also do this if you have an unexpected expense. Just spend that much less on something else.
This practice is good for your business because if you just spend and spend money without watching the budget, you are going to overspend and you might even go into debt. Many small business failures can be traced back to a lack of budgeting.
Utilize Tools to Help you Budget
Many accounting programs have a way to help you with your budget. By using these tools, you might find that your budget comes together faster than you thought since you might be able to link your numbers from over the years right into your budget! Even better, outsource your budget and other accounting and bookkeeping tasks to a financial expert. This way, your budget is on track, you have a clear idea of your financial health, you have reliable cash flow, and you will save a ton of time as well.
Don’t Be Afraid to Be Detailed
The more details that you have in your business budget, the better off you will be. Really look at how you break up your items. Group similar things together, though if you think they need to be separated, do it. The more detail that you have, the easier it will be to follow your new budget.
Even though starting a business budget can be hard, it is worth it. Take your time and look at your numbers. Start with the expenses that you have every month. Then, work with the rest. Try to leave a little wiggle room for unexpected expenses. If you don’t, you may end up going into debt.