Budgets are valuable at any stage and area in life.
You own your own business.
You excel at the services you provide.
You are sought out by customers and clients.
Bookkeeping is not a strength.
I get that.
In fact, I am married to my CPA.
According to a recent Investopedia article “6 steps to a better business budget,” the financial health of your business is important and should not be overlooked.
The best way to begin is with a budget.
You have business expenses and revenue.
Expenses would include things like a mortgage, payroll expenses, utility bills, cost of goods sold and raw materials, taxes, and interest.
You can estimate revenue from recent business trends.
If your business is new, you should research similar local businesses.
Once you have these numbers, you need to match expenses with business revenue.
Calculate the weekly overhead.
Only after you do this will you be able to know how much can be saved or used to expand the business.
What are practical steps a small business can take?
Understand Industry Standards
Do your research.
You should know industry data.
Talk with other local business owners.
Look at IRS rules.
You need to know the risks and pitfalls before taking action.
Create a Spreadsheet
You need to have a plan and visualize money allocation before you take action.
Outline how much revenue needs to be allocated toward raw materials.
Reach out to potential suppliers for more specific estimates.
Your spreadsheet should also include taxes, rent, insurance, and other expenses.
Make Some Breathing Room
You may think some expenses will be fixed in the future.
This is not necessarily the case.
Often expenses increase.
Accidents also happen.
Be sure you have some wiggle-room in the event of emergency.
This is especially important if you are wanting to add an employee or expand.
If you can have more control in certain areas, take action.
Make purchases at the start of a billing cycle.
Take advantage of payment terms offered.
Review the Business
An annual budget may work for some businesses.
You may need to revisit yours more frequently.
If so, try planning one or two months out.
Do not become complacent when it comes to unexpected expenses.
Search for Less Expensive Services and Suppliers
Others may be able to provide what you need for less.
Finding competitive rates is important.
Budgeting does not have to be scary.
Knowing what you have and are spending will help your business operate, grow, compete, and survive unexpected emergencies.
If you mind the dimes, then the dollars tend to take care of themselves.
Reference: Investopedia (June 26, 2018) “6 steps to a better business budget”