Before jumping into any new business venture, it’s extremely important to create a budget. A carefully executed budget will tell you how much you are spending, where your money is going and help you keep your funds in the positive. Here is what you need to know about creating a business budget.
Calculate expenses. Start by listing all your business expenses. Create a list for all your fixed expenses such as rent, utilities and wages. Make another list for all your variable expenses like supplies, travel, taxes, etc. Try to track these expenses for at least three months to get a clearer picture of what your business is spending.
Estimate your income. What do you expect to earn in a given month? Make a list of any expected income revenue sources. You should also track your actual income. Track these numbers for a few months as well, listing both your forecasted income and actual earnings.
List your gross profit margin. You have your expenses listed as well as your actual income. Calculate the difference between the two. Try to keep this as accurate as possible, using your actual data to find this number.
Identify any problems. Take a look at your projected numbers and your actual numbers to see if there are any big discrepancies. If there are, identify any potential problems that could be costing your business money. This may mean spending less on things like marketing, or finding a way to increase your revenue.
Question your expenses. If you find that you are spending more money than you would like, go over your budget to determine where you can save a little money. Could you find a better deal on supplies? Could you outsource any tasks rather than pay a dedicated employee to do them? Figure out ways to trim your expenses.
Readjust your numbers. Don’t be afraid to readjust your estimates. After reevaluating your expenses and income, you may discover that your estimated budget is off. Amend any numbers so that they accurately reflect your finances.
Keep reassessing. Make reevaluating your budget a regular part of your financial management plan. You may find that you need to spend less during certain times of the year, resulting in a budget adjustment for that period. Or unexpected issues may occur, like an economic downtown. A business budget should be a tool to help you track your finances and stay on top of all your money. However, it should not be something that is set in stone.
For any business, new or old, it’s important to keep track of your money. This means tracking both estimated and actual numbers, and creating a realistic budget for your business. A budget is a great tool that will let you see what you are spending and making, and what you should be spending and making. Use these helpful tips to get started.