Do you currently own a business and feel like you’re struggling to swim in it? Well, a business budget might be what you need for your ship to sail that little bit more smoothly. A budget helps estimate a business’ income and expenses to keep it stable and on the right track.
WHAT IS A BUSINESS BUDGET?
A business budget provides a clear image of expenses and incomes and should encourage important decision making for your business. That can be for marketing, cutting back on expenses, hiring staff, purchasing products or equipment, and prioritising what is crucial for your business when it comes to expenses. It also creates a clear map for your businesses financial challenges and goals as well as pushing you up the ladder of success!
Doesn’t that sound nice?
So, you could consider it a plan of action that helps you monitor performance to keep your business on track.
HOW A BUSINESS BUDGET WORKS
To put it plainly, a business budget works by organising your businesses funds monthly, and cautiously allocating where you spend them. It’s planning-ahead of your expenses to ensure your financial comfort and knowing you don’t have to worry when an unexpected bill presents itself.
Shooting for the stars isn’t necessarily a bad thing when running a business, but let’s be realistic, miracles don’t happen overnight. So why wait for miracles to happen when it comes to your business budget? Conservation is key, as well as overestimating your expenses and underestimating your income.
At the end of the day, the success of a business relies on how effective the business planning process is done by the owner.
If you don’t know where to start, look back at your businesses previous financial data and analyse where the expenses come from, and how much your business has financially brought in. This is where the overestimating and underestimating comes in.
However much your expenses totalled to in the previous month, expect a bit more the following (this way you avoid nasty surprises!).
Then look at how much money the business made in that month and expect to bring in the same, or ideally a bit less, for the following. ‘Expect disappointment and you’ll never be disappointed’. – MJ, Spiderman: No Way Home.
This way if your calculations are correct, you’re less likely to cut a huge hole in your pocket and might even come out with some profit!
DON’T SPLURGE, CONSERVE!
In most cases, it’s easier to estimate expenses over income. Especially when a lot of the business expenses go into fixed costs such as rent, mortgages, employee salaries, utilities, etc, which is another reason to be realistic with your budget.
In your personal life, you may put a little or a lot of your money to the side as you can for savings, unexpected bills, or just rainy days. So why not apply this to your business?
When in doubt, be conservative. As a new business starting up, it could be a good idea to conserve as much as possible before you end up with some hefty bills from trying to run before you can walk. Work out a clear outline for your finances, and again, overestimate your expenses and underestimate your revenue!
Remember! Without a budget, you could be unknowingly holding your business’ potential back. And if ever in doubt, feel free to get in touch with us at Diamond Accounts for advice on the other ways to boost your business.