Small businesses can use various ways to grow through proactive planning, management, and organization. For many, these may seem like chores that take time and focus away from the real mission of the business. But these essential responsibilities contribute towards the growth that can make possible your business objectives.
Budgeting and accounting are important tasks, which no business can be without. Budget planning enables an organization to understand its potential and where it is going. It helps executives to stay on top of things and see a clear path for the future. Developing an effective business budget should be an early stage in managing your business. After this, it is possible to develop additional budgets, including a digital marketing budget.
Reasons to create a budget for your small business
An organized financial budget enables you to understand your available funds, expenses, and the income you need to meet your business objectives. This is important information that all business leaders should have at their fingertips on an everyday basis.
With a reliable budget that provides a user-friendly overview and details of every transaction, small business executives can make better financial decisions. A clear budget shows you the current status of your business finances, your financial history, and the progress you have made. It can also show you the direction you are taking in terms of your financial goals.
A good small business budget also provides the overview you need to take essential financial measures. You can identify the areas that can lead to higher profits in the short-term or long-term perspective. This gives you immediate insights into different areas of your business, so you can adjust expenditure and focus on maximizing profitability.
Another reason for maintaining a detailed budget with records of your finances is receiving loans or funding. Banks and investors always need to look at your income and expenses over time before they are willing to make any commitment to your business.
5 main steps to start budgeting for your small business
When creating an effective budget for your small business, the best approach is to take things one step at a time. Here is a sensible set of steps that you can follow:
1. Look at your industry standards
All businesses are different in terms of their industry and sub-sector. So it is a good idea to do some research into the ways your revenue is likely to be allocated to your costs. It is advisable to look at the IRS website, where you can find useful information relating to your particular field.
2. Review your revenue
Determine all of your income sources on a monthly basis. Be sure to account for all of your revenue streams and not just your profits. It is preferable to calculate your monthly income over a longer period of time, such as six or twelve months, so that you can account for any seasonal variations.
3. Review your fixed costs
The next logical step is to look at your fixed monthly costs. They can include supplies, website hosting, rent, insurance, taxes, payroll, or debt repayment. These are the regular costs that remain the same from month to month, which can be subtracted from your income.
4. Account for your variable and unexpected costs
Variable costs are separate from fixed costs in which they are subject to change. These can be things like utilities, marketing costs, shipping costs, or the owner’s salary. In addition to these costs, there can also be unexpected costs, for which it is a good idea to set aside a contingency fund. This can be to account for damage to essential devices or equipment.
5. Finalize your budget
When you have tallied up all of your revenue and expenses, then you are ready to organize your total cash flow in a single, comprehensive document. From here, you can view your most relevant financial figures in one place and notice any trends that are impacting your business. These can be profit gains or losses or seasonal trends.
Best budget templates and apps
If you’re wondering how to write a business budget, the best place to start is usually with a reliable and simple budget template for a small business which saves time. These make it easy to set up a budget and manage your finances.
Here are some excellent budget templates for different purposes:
- This list of 11 budget templates for freelancers comes from BusinessLoad;
- Capterra provides a budgeting template spreadsheet for small businesses;
- Another small business budget template comes from SmartSheet;
- Gusto offers a general budget template aimed at startups;
- Microsoft Office also provides free budget templates for various purposes.
In addition to templates, you can use one of the small business budget software programs that can benefit your business. These include:
- OmniCalculator: a useful business budget calculator for estimating your budget;
- Xero: a comprehensive budget tool aimed at small businesses;
- QuickBooks: another business budgeting and accounting tool;
- FreeAgent: an accounting tool for small businesses and freelancers;
- Google Pay: a solution aimed at personal and small business finance;
- Scoro: a combination of budgeting, planning, forecasting, and automation tools;
- Float: a tool used for planning and forecasting that integrates with other tools;
- FreshBooks: a cloud finance and accounting tool for small businesses.
Once you have completed a clear budget for your small business, then your finances and the overall running of your business will be improved. This can leave you to focus on what really matters: your business core.
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