Business Budget Planning
Just the mention of small business budget planning can send many small business owners into a cold sweat. If you're not sure where to start with your business budget planning or how to make a budget that accurately reflects your financial projections and expenses please read on.
I would like to thank Vickey Boatright of www.basicaccountinghelp.com for providing this article.
How to create a
budget for your small business
by Vickey Boatright
One of my least favourite chores as a small business owner is creating an annual budget.
I usually put it off until December when in reality it should have been started in September or October.
I finally figured out some small business budget tips that help me get that dreaded task done a lot faster and without all the fret and tears of budgets past.
How to make a budget
- Don’t Fret and Sweat the Big One!
Break your budget up. You can prepare some general goals for the year, but then concentrate on preparing a more specific budget every month or two. Expenses such as your property rates or taxes that are due once a year, would be reflected in that month's budget, rather than divided into twelve equal parts throughout the year. You can better spot real changes and revise your budget accordingly by preparing monthly budget breakdowns and comparing them with actual dollars expended and received.
- Study Last Year’s Budget.
A good place to start is a careful review of your small business’s sales history. Has it increased these last few years or declined? Figure the percentage of increase or decrease.
Same goes for your expenditures. Budgeting for fixed cost such as mortgages or rent is easy. However, determining your variable cost such as utilities can be very challenging. Gas and electric charges have increased in the last few years, and in some countries they have skyrocketed! Check now what the going rate is and what your utility provider projects to be the cost by January/February of next year. You may be looking at a 20 to 50 percent increase in what you actually paid last year in some areas.
If your business is a startup, you will have to make your projections based on researching similar business to yours. Sometimes you can visit local business that are for sale and asking questions about weekly or monthly revenue and traffic patterns. You can also research your business’s trade journals.
- Build Some ER Cash Reserves.
It can be difficult to get ahead with the challenges our small businesses face today. One way is to try to build some reserves over time that can help meet those unexpected expenses and significant increases. If you can afford it, set aside a set percentage of your monthly income.
- Get Some Expert Help.
If creating budgets isn’t one of your strengths, then find someone to assist you with this process. Ask a CPA, financial advisor, bookkeeper, or banker to help you set up a budgeting system that will work best for you. After you have an effective system in place---it is a lot easier to prepare a budget each year.
Once you have your budget completed, do not stick in a desk drawer or file never to see the light of day---until you've got to dig it out to create next year’s budget.
Keep it where you can get to it and review it often. Create those mini monthly budgets. They can provide you with wonderful financial management tools. You can anticipate peak periods and plan vacations and special promotions for the slow periods.
For additional small business budget tips, please visit www.basicaccountinghelp.com
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