Budgeting for small business
It’s no secret that Small Business owners are amongst the most time-poor people in society. So, when we suggest that you should add Budgeting onto your list of ‘things-to-do’, you’ll probably let out an audible sigh. Once you’ve done that, take 5 minutes to read the following article and see if Budgeting for your business moves up on your list of priorities.
Why spend valuable time budgeting for your business?
Here it is … the most important reason to invest time into creating and managing a budget for your small business is because it is one of the most valuable things you can do to ensure its financial success.
Budgeting enables you to set financial goals and make informed business decisions. It’s also essential if you intend to seek finance.
What a budget can reveal
A well-managed budget should tell you the sales you need to make to cover your expenses and how much money you can afford to put back into your business.
Your budget can also help you understand if you can afford to hire extra help, anticipate cashflow shortages and predict future opportunities and challenges.
What figures should I include in my small business budget?
The most Important figures on your budget are income, fixed expenses (i.e. rent, insurance, some vehicle expenses) and variable expenses (i.e. utilities, stock, wages, professional services). You may also want to add project or expansion costs if this is part of your plan.
How long should my budget run?
The longer you can plan the better, however, start with 12 months. You can build on it over time and once you become more confident with your predictions.
How often should I review my budget?
It is important to revisit your budget throughout the year and compare budgeted figures to actual figures. If your outgoings are more than budgeted a budget review provides an opportunity to reduce spending on non-essential items. On the flip side, if your income is more than you’ve budgeted, it may provide you with the opportunity to reduce debt or invest in strategies to grow your business.
Are you planning to be wealthy?
People rarely become wealthy by accident. Most successful small business owners plan to get to where they are, and budgeting is a key part of that process. You don’t get into your car without a plan of where you are going. Business planning is a road map of where you’re going. Budgeting ensures you have the fuel you need to reach your destination.
Benefits of budgeting
The 6 big benefits of budgeting are:
- You’ll learn how to manage your finances more effectively
- Budgeting enables you to better track your business’ performance and reach your goals
- Budgeting improves your ability to make informed decisions
- Budgeting reveals opportunities and challenges in advance
- Budgeting allows you to plan and follow through on any growth goals you have for your business
- Peace of mind
How to create your small business budget
Not surprisingly, the best place to start your budget is by having a conversation with a small business accounting firm such as Bizally. Bizally helps businesses like yours by ensuring you are focused on the right approach and can assist you in avoiding some of the common mistakes made with first-time small business budgets.