Business budgets – Do you budget properly?

A business budget is very important, if you don’t have a proper business budget your business may not be profitable. A budget will keep your finances under control and working well for you. I definitely recommend reading up on budgets, setting up a budget and keeping on top of your budget. I have put together a simple step by step guide, this is not a comprehensive guide but it covers the basics:

  • You need to decide on how long your budget will last – Small companies are better off having a weekly or monthly budget. It is a lot easier to keep on top of.
  • Predict your income realistically – This is important because your budget is relying on your income. If you over estimate your income, you will most properly over budget, and then you will get into debt.
  • Create a budget – In an Excel spreadsheet, record what you spend, categorise your spending; for example travel, rent and utilities, and allocate specific amounts to each category. This is your budget.
  • Separate your fixed and variable amounts – This makes budgeting easier, fixed amounts are relatively simple to budget for so these should be categorised together. But the variable amounts however may need more careful thought.
  • Make sure you stay on track of your budget – Set aside time (according to the 1st bullet) to review what you have spent in comparison to what you have budgeted. Highlight any discrepancies, there will certainly be a few, especially in the early days.
  • Act on the discrepancies – Highlight areas of your budget where you are always over or under spending. You need to decide whether you need to change your spending habits or whether you need to up your budget for that particular category.
  • Seek financial help if you struggle with numbers – An advisor can help find plan a budget to suit your business needs and help you compare your spending against your budget.

I hope this is of help, I have found a few useful resources for further reading:

http://www.inc.com/encyclopedia/businessbudget.html

http://www.entrepreneurhandbook.co.uk/5-smart-ways-to-lower-business-budgets-and-survive/

http://www.investopedia.com/articles/pf/08/small-business-budget.asp

If you have anything to input, please reply with a comment.

 

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