Budgeting Made Simple for the Small Business Entrepreneur

Posted on 30. Dec, 2020 by in Budget, Managing Finances, 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 own 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.

By having a budget, the business owner can use the extra money gained to grow the business. Use the extra money to purchase needed products or supplies, to market and promote the business, hire needed employees. During a decline in sales, the monthly budget will prevent the business from failing because you will know when to cut back on certain expenditures.

Where do you start?:

Creating a budget doesn’t have to be hard or complicated. Make it a simple process by utilizing your financial software or creating a simple spreadsheet. 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. Make adjustments based on your business plan for the new year. Use your monthly financial reports to monitor your monthly budget against your actual numbers. This allows you to quickly analyze those items with large budget variations and make any needed adjustments.

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. Let them get you set up in QuickBooks or any other accounting software. Keeping your accounting records up to date, helps you 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.

Creating a Budget:

  • If this is your first budget, don’t worry about getting it 100% right. Your budget is a work in progress. You can adjust it throughout the year.
  • Use your financial software such as QuickBooks to help draft your budget.
  • 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.

Having a budget, will help you in taking your business to the next level.

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