Budgeting Made Simple for the Small Business Entrepreneur

Posted on 31. Oct, 2019 by in Bookkeeping Articles, Budget, Managing Finances, QuickBooks, Small Business Tips

Most of us came from the corporate world where working with budgets was an everyday occurrence. So now you are the one in charge and budgeting is the last thing on your mind for your business. Budgeting is just as important to the small business owner as it is to major corporations. It helps control those ebbs and flows that most small businesses experience throughout the year.

Creating a budget doesn’t have to be hard or complicated, you can make it a simple process by utilizing your financial software. For example, QuickBooks allows you to draft a budget based on your prior year’s profit & loss report. Once the budget is created, review your income and expenses and make any needed adjustments based on your business plan for the new year. Now when you run your monthly financial reports, you will be able to monitor your monthly budget against your actual numbers allowing you to quickly analyze those items with large budget variations.

If your accounting records are a mess then the figures you use will most likely be inaccurate. How can you successfully run a business without knowing where you are financially? The beginning of the year is the perfect time to start keeping good accounting records. If bookkeeping is just something you hate to do, hire a virtual bookkeeper and let them get you set up in QuickBooks. By keeping your accounting records up to date, you will be able to see how employee or contractor time is spent on a particular job, where you are on project costs and what your bottom line is. This information will also assist you when preparing your next bid or proposal – you certainly don’t want to be consistently losing money with each project. If you do, you will not be in business for very long.

If you don’t have goals for your business or a way to measure your progress, your business will not grow and most likely get worse each year.

Some easy steps to get started:

  1. If this is your first budget, don’t worry about getting it 100% right. Your budget is a work in progress and can be adjusted throughout the year.
  2. Use your financial software to help draft your budget.
  3. Review your profit & loss reports for the last 2 years and make any needed revisions to your budget. Is there perhaps a new service or product you will be offering this year? Use your sales goals and work from there in creating your budget. Don’t forget to include the costs involved for the new product or service.

If you do not have these measurement tools in place, your business will continually run at a loss and soon out of business.

Remember your budgeting is another way of goal setting – if you are behind in sales, step up your marketing efforts and cut back on those unnecessary expenses until you are back on track. The budget should reflect the direction you envision for your company.

By having a budget, the business owner can use the extra money gained to purchase needed products or supplies, to market and promote the business, and when there is a decline in sales, the monthly budget will prevent the business from failing because the owner knew to cut back on certain expenditures.

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