You need to plan your budget, no matter how big or small your business is. The budget is one of the most important aspects of your business. Usually, small business owners think that only bigger companies require budgeting. This is where they go wrong.
It may surprise you, but small businesses need to be more careful when it comes to their finances – because one simple mistake can create a financial disaster.
What Is A Budget?
Budgeting means planning all your financial resources and expenses in advance. It is a planning tool that a manager or business owner should use periodically to measure various trends like cash inflow, outflow, and asset growth.
How to Create a Budget
If you are planning a budget for the first time, then start making a list that includes the cost of goods or the services you offer and also note the expenses required for operating your business day-to-day, including utilities and other fixed expenses.
Once you get everything down on paper, you'll probably find that the list is bigger than you anticipated, and includes things like transportation used for your business, any supplies or inventory used to operate the business, employee payroll, taxes and other expenses.
You should plan a monthly as well as an annual budget. This helps to identify any long-term expenses. When you are planning a budget, everything that causes money to flow in or out must be accounted for.
Who Should Budget
Budgeting is associated with all types of businesses, large or small, so every business owner should budget. A written financial plan helps you to know how much to spend and helps your business transactions to be profitable.
When to Plan a Budget
It's important you plan your budget first and then start your business. It is also good to review your budget well before the end of the fiscal year to avoid any surprises come tax time.
Budgeting may seem like a chore; but at the end of the day, whether you stick to your budget or not will determine the financial viability of your business.
