Small Business Budgeting Basics
If you run a business, one of the most consistently worrying things about managing it will probably be the budgeting. After all, your business’s success relies entirely on your ability to exceptionally budget your finances. Therefore, it’s crucial that you figure out a system that encourages responsible budgeting, but provides you with the means to safely take risks with investments occasionally. This month we’re detailing the basic aspects of budgeting you need to consider to ensure your business succeeds!
Why and When You Should Budget
Budgets are a fundamental part of any business as they control expenditure and determine your business’s direction. In addition, if you wish to seek investment from third parties, budgets are essential to proving that their money is well-placed in your business. They are instrumental, therefore, to success.
You should layout the groundwork for your budget before you start trading. Regularly revising your budget throughout the year to tweak it to reflect current circumstances is then crucial. A formal budget reassessment should also be undertaken annually. You should always have a good handle on the financial position of your business in order to manage it efficiently, and by regularly updating your budget you’ll achieve exactly that.
Profit & Loss Accounts
By matching the timing of your sales with the timing of your expenses, you can form an idea of the profits and losses of your business. If you show a sale in January, this type of budgeting will show the cost of that product or service as appearing in January, as opposed to the month it actually cost you. In this way, you can see how well your business is doing.
These forecasts look at when you actually receive money and when it goes out. As such, you’ll always know how much money you can expect to have in your bank account and whether you’ll need extra stimulus in the form of loans or investments.
It is hard to estimate the turnover of your fledgling business, but by researching local competition and calculating how many sales you could make based on advertising could clarify matters. Once your business is well established, you can use previous turnover figures to estimate future sales and plan realistic expansionary moves.
The cost of each sale must be factored into your budget. The turnover you make in a year has to be balanced against the cost of each and every sale to you, and this will then give you your actual profit margin. Realistically estimating your sales cost will ensure your finances are budgeted correctly for the incoming year.
Every business has overheads it has to pay to function adequately. These are often fixed costs you can include easily in your budget. They include rent costs, insurance, advertising, utilities, salaries, interest payments, shipping costs, and so on. You should take time out to ensure you have comprehensively listed all of your costs to avoid having to pay any surprise fees that scupper your finances.
Budgeting Your Finances the Professional Way
As budgeting is essential to the continued success of any business, you need to take action to ensure it is done correctly. Even if you have previous experience budgeting commercial finances, running a business is a stressful, hectic venture – it is difficult, therefore, to monitor all financial aspects of your business and ensure nothing falls through the cracks and that all your taxes are paid.
By hiring a professional accountant, you can rest assured that all budgetary concerns for your business are completely taken care of, leaving you free to manage your business how you see fit.