A well-planned budget can build the solid foundation that carries an entrepreneur’s business through challenging economic times. Using a budget, you can create balance and stability that will help your business expand and keep growing no matter the financial weather.
Know Exactly Where The Money Goes.
A budget is an ideal tool to track where each and every dollar is spent within your company. Such financial tracking will enable you to make smarter fiscal decisions by trimming back unnecessary purchases and other expenses. Following the money trail can also balance a business’s spending by allowing the entrepreneur to plan for unexpected high dollar expenditures. Saving money for needed improvements or emergencies over a period of time can help reduce a company’s financial struggles and help it to grow faster. Saving the money for expensive upgrades will allow your business to pay cash and not buy on credit and pay interest.
What’s Your Company’s Biggest Moneymaker?
Careful tracking with a budget will reveal your most profitable products or services and allow you to funnel more money and energy into those enterprises. Knowing what sales bring your company the most cash can point the way to greater success for the entrepreneur.
Begin Your Budget Journey.
To start your budget plan, add up all sales and other sources of your company’s income to determine how much profit your business realizes biweekly or each month. Depending on how large your business, the longer period of a month may be better to reveal the source of the most substantial profit and spot better opportunities.
Determine Company Costs.
The next step is to determine the cost of running your business. How much do you spend on raw materials, utilities, loan payments, or building rent? Add together all the fixed costs as well as the variable costs. For example, if you spend a certain amount annually or biannually on a bookkeeper or tax advisor, divide this amount by 12 to get the monthly cost and add this to the total. Subtract the dollar amount of your expenses from the amount earned in sales.
It’s important to use a budgeting method that is the most comfortable for you. If you prefer to use a retro ledger book and ink pen instead of a computer and software, by all means, you should use the ledger and pen. Implementing whatever method makes you feel comfortable will ensure you are consistent and don’t neglect the very necessary task of budgeting.
Does Your Forecast Match The Actual Numbers?
When preparing your company’s budget, figure out approximately how much cash it takes to keep your business running. This amount is your forecast. Then as time passes, compare the actual costs month by month to this forecast. Do the numbers match closely or is there a wide variance?
In the beginning, work on improving your accuracy in forecasting just how much money you estimate it will take to keep your business running. As you gain experience, see how close you can keep the monthly numbers to the forecasted budget.
Do you need to spend that much on raw materials or can a portion of that expenditure be cut? Can any utility costs be lowered? Careful tracking using a budget can identify spending problems, and cautious experimentation can help fix those problems, helping your business to save some significant cash to reinvest back into the company.
“Remember, wealth has nothing to do with money, success has everything to do with failure and life is as simple as you make it!” – John Dessauer