Creating a budget for your business is the best way to track the flow of money in and out of your business and make feasible plans for the future. Business owners may find budgets extremely helpful for laying startup plans or making plans to expand your business. Small business budgets are also crucial in cutting back on unnecessary expenses that may be eating up a considerable portion of the business’s revenue.
Depending on the type and size of your business, you may create an annually, quarterly, or monthly budget, though monthly budgets are more recommendable as they give you a better perspective of the ever-changing business financial picture.
Below is a step-by-step guide to creating a better and more workable budget for your small business in 2019:
Step #1: Before embarking on creating a budget for your business, it is important to have an understanding of how to correctly go about it to avoid confusions along the way. Consider using a pencil and paper to prepare one or a computer program that makes it easy to identify and correct errors.
Step #2: Determine whether you want your budget to be monthly, quarterly or yearly. You can benefit from any of them depending on your business type and size. If your business is small or is still in its infancy, you may want to consider a monthly budget, which makes it easier to compare your actual earnings with your predictions and business objectives.
Step #3: Next, ensure you include all fixed expenses in the budget. These include costs that won’t change in a long time such as rent bills, taxes, and mortgage payments. Loan payments for money injected into the business may also be included here.
Step #4: Include variable expenses such as phone bills, utility bills, and other costs that may vary monthly. Consumable supply costs can be included in this list as well.
The best way to identify what to include in the variable expenses list is to identify all your expenses over the past one year or six months and pick the ones that have been changing on a month to month basis.
Step#5: Another essential thing to consider is the projected income for the next one month or quarter, depending on your type of budget. Record the figure somewhere and leave a blank space for the actual income at the end of the period budgeted for.
Step #6: Analyze your business budget at the end of the first period to see how close you got to predicting income expenditure in a side-by-side comparison with the amounts you actually paid out and earned. You can do this by calculating the difference between your estimates and the actual figures from your other record books. For instance, if your budget expenses were bigger than the actual expenses, you subtract the actual expenses from the budget expenses to get the deficit. The point is to keep the differences at the end of every month as low as possible.