3 Tips to Help Budgeting for your Business
A new business cycle will begin soon and you will agree that as a business owner, you need a detailed budget to help evaluate your estimated level of financial growth and provide for expenses accordingly, in order to implement plans for increased revenue in 2021.
This is why we have put together 3 tips to help you through the budgeting process.
- Manage your expectations
- Plan for expenses
- Detail it on a spreadsheet
Manage your expectations
Before you proceed to create a budget, you need to realistically consider the financial position of your business. This will help you make reasonable estimates on how much to expect in profits while keeping your expenses at the best possible minimum.
Depending on the way your business is run, your financial position may be assessed by comparing your earnings with the amount spent on expenses. Remember to take stock of all the sources of your earnings so that you can consider options to make them yield more and add the financial implications of those options into the budget.
Plan for expenses
Generally, expenses are divided into three parts – fixed, recurring, and non-recurring
A fixed expense refers to major payments that are unavoidable and sometimes, a legal obligation. In simple terms, they are your “bills”. Examples are paying for rent, tax, staff salaries, raw materials to produce your goods, branding/packaging of products, internet access, electricity, renewal of membership subscription fees, etcetera.
Recurring expenses are costs that facilitate the daily operation of your business. They may change in amount or frequency per month and include among others, the cost of refund to customers on faulty products.
Non-recurring expenses are expenses to be made at your discretion and occur mostly unplanned. The best way to budget for this kind of expense is to track the past spending habits of your business. Examples include things like the cost of fixing a leaky roof, towing damaged equipment, etcetera.
Detail it on a spreadsheet
A spreadsheet helps you visualize financial projections for your business in clear numbers. It makes for more efficient planning and helps give a detailed perspective on the financial health of your business. It is also easier to spot loopholes in your plans with the information it provides. A simple Microsoft office tool like Excel is useful for this purpose.
As always, extensive research is invaluable in fine-tuning money matters and Google is resourceful to rely on. You will be able to access editable templates and gain additional guidance on putting together a decent budget.
An effective and realistic budget is a major part of implementing a business plan and we hope that the tips shared provided assistance in this regard.
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