Creating a business budget is very similar to creating a personal budget. However, there are some differences. When you own a business, taxes are not directly taken out of your income, which makes your income and any quarterly tax payments extra important to track.
Having an accurate and realistic budget will help you make accurate spending decisions and make it easier to predict profits. This means the more frequently you track your costs, the better. Here are the recommended steps for creating your business budget:
Step 1: Determine how frequently you want to track your costs and income.
Generally, it is advisable to choose every week or every month. At first, it may seem like a time-consuming task to track and enter your spending every week, but it will pay off in the long run and as you become accustomed to it, you’ll find that it really only takes you a few minutes every week.
Step 2: Determine your expenses.
This means your operating costs like your phone and web hosting fees, the costs of your taxes, the costs of outsourcing, and the costs for marketing, publicity, and so on. Make a list of all categories you anticipate having costs and all areas where you already know your expenses.
Step 3: Now the fun stuff!
You get to predict your income. The best bet is to predict on the conservative side. That way if you have a bad month, your budget isn’t blown; however, when you have a good month, and you will have many good months, you’ll have extra money to work with.
Step 4: Track your expenses and income and review your budget often.
Your budget isn’t set in stone. It is a living breathing thing that will change as your business changes. If you find you’re spending more in one category, make the adjustments in your budget. A business budget isn’t a diet or a strict regimen, it is a spending plan.
Step 5: Realize that in the beginning,
you’ll likely have more expenses than income. This is normal for most start-up businesses. Track the difference between what you do spend in each category and what you planned on spending. This will help you predict the future and keep your budget realistic and accurate. Budgeting your small business is good business. Without a budget, you’re unable to make accurate predictions and keep your business profitable and going strong. If you’re serious about being a successful business owner, you can’t do without a business budget. The good news is, it doesn’t have to be difficult. A simple spreadsheet and a little time can make all the difference.