No matter how much business experience you have, creating a budget is one of the most important things for your small business (Inc.com). By creating a budget you are essentially creating a guideline for expected income and expenses, which will enable you to come your anticipated financial goals with the actual numbers. This will be able to show you how well your business is performing and will enable you to plan ahead and find any changes that need to be made. Creating a budget is a key step for any successful business and is not something that can be overlooked.
Creating A Budget For Your Small Business
A budget can be created in whatever way is most comfortable to you, you can use the classic paper and pencil, a computer spreadsheet, or even a business accounting software. You will also be able to choose the time period that you want the budget to encompass (monthly, quarterly, annually). If you are unsure about the best length of time, consider a monthly small business budget because you will be able to compare your anticipated numbers to the actual numbers more frequently, which would allow for changes to be made in a more timely fashion.
Be sure to keep the spreadsheet for you small business budget very neat and organized. You are able to enter all of your fixed expenses (unchanging expenses) such as rent, loan payments, or any pre-paid costs into the spreadsheet as they are. All variable expenses (changing expenses) such as utilities and supplies can be entered, but you will need to look at past variable expenses to find the average cost for each category and that average is what you should enter into the budget spreadsheet. If you are a new business and do not have any past expenses to average, then consider doing some research into what the expenses associated with your small business are. Next, insert your predicted income form earnings and any other expected revenue sources into the spreadsheet. It is also a good idea to make two columns for every one of these categories, one labeled “Budgeted” and another “Actual.” This will allow you to calculate the difference between the budgeted figures and the actual figures.
If the figures do not match then find out where and why the figures differed. By doing this you will be able to identify potential problems and fix them or you will be able to capitalize on a potential opportunity you did not know was there. By creating a budget for your small business you will be able to better plan ahead and prioritize your business funds, which will improve your educated decisions and enhance your business operations.