Keep Your Small Business Budget InTact
Small business owners must know about their budgets. After decades of consulting small business owners, I really believe that not understanding finances in small business is a primary reasons for small business failures.
When you own and operate a small business, it is critical that you keep close tabs on your finances. There’s nothing worse than owing more money at the end of the year than you’ve actually made. Budgeting your business begins before you open your doors. In fact, it begins at the business plan level. Here are some questions to answer:
How much do you have in start-up funding?
What will your actual start-up costs be?
How will you market your business?
How much will your marketing expenses be?
How much will it cost to operate your business?
Operating expenses include:
* Phone lines
* Web site development
* Website hosting
* Merchant accounts
* Shopping cart software
* Outsourcing expenses
* Accountant fees
* And much more
What will your profits be?
When will you expect your business to be profitable?
How will you support yourself during tighter months?
How will you pay your taxes?
Lots of questions, right?
The best way to handle tracking your profits and your expenses, and to stay within your budget is to actually make a budget, and keep it.
Creating a budget and keeping to it will not only help you keep out of debt, it will help you make important financial decisions. How else will you know if you can afford a new software product, a joint venture investment, or if you can outsource your administrative tasks? That being said, the more accurate your budget, and the more frequently you track your income and expenses, the better your information will be.
If you track your spending and income on a quarterly basis, that’s great because you will have your financial information and it will be accurate. However, if you track it on a weekly or monthly basis your information will be that much more accurate.
The first step to creating a business budget is to think clearly and honestly about your expenses. Using a spreadsheet or accounting software, create a list of categories and a list of monthly, weekly or quarterly spending available for each expense. Note that the more frequently you track and account for your spending, the more control you’ll have over your finances. And your financial information will be more accurate when you need to make weighty financial decisions.
A budget will also help you come tax time! With an accurate budget, your expenses, profits and taxes are all at the tip of your fingertips. This means you don’t have to dig through piles of receipts and invoices to find the information your accountant is waiting for. Time is money, right? If you haven’t already, save time and save money by creating a small business budget. You’ll be glad you did.