A budget is a financial plan for the coming year that outlines how you would like to allocate your money, both in terms of expense and earning. If your small business is successful, you will need to create a budget each year so that you can set aside enough money for expenses as well as profits. But if it’s been awhile since you’ve thought about budgets or creating one might be intimidating given all the other things on your plate right now, then this article is for you! We’ve put together 10 tips that will help make budgeting easier:
Don’t discount your skills.
- Don’t discount your skills.
- You have the ability to do many tasks yourself, including bookkeeping and accounting. By doing this yourself, you can save money that would otherwise be spent on hiring someone else to do the job for you.
- Don’t overspend on things that aren’t necessary for running your business. If there is something that costs more than what it would cost elsewhere or if there are multiple suppliers offering similar products at different prices, consider purchasing from one of them instead of paying more than necessary just because it was convenient for someone else in the past (and they were too lazy/busy/etc.).
Create a budgeting schedule.
- Create a budgeting schedule. One of the best ways to stay on track with your business finances is by creating a budgeting schedule and following it closely. This can be as simple as writing down all of your expenses at the beginning of each month or week, and then using this information when planning out how much money you want to spend throughout that period.
- Keep track of every expense in one place. You’ll also want to make sure that every single expense gets recorded somewhere so that it doesn’t get forgotten about later on down the line when it comes time for tax season! The easiest way for this is probably through an app like Mint or Personal Capital (I recommend Personal Capital because its free). These apps allow users access their accounts from any device with internet connection capabilities so they never miss another bill payment again!
Know the difference between business expenses and personal expenses.
- Know the difference between business expenses and personal expenses.
- Business expenses are tax deductible, while personal ones are not.
- Businesses can use their money to grow their business by investing in things like advertising or new equipment that helps them produce more products or services. Personal spending has no benefit for your company’s bottom line (unless you’re buying something to resell).
Keep a running log of your budget at all times.
- Keep a running log of your budget at all times.
- Use a spreadsheet or notebook to keep track of your income and expenses, or use an app to help you stay organized.
Establish a realistic budget for yourself.
Establish a realistic budget for yourself.
Before you can get started, you need to know what your monthly income is and how much money you need to save each month. The difference between these two numbers is the amount of money that will be left over for discretionary spending (e.g., eating out). If this sounds like something that would be difficult or impossible for your small business, don’t worry: there are plenty of ways around it!
For example, if your business isn’t making enough money yet (or ever), then consider cutting back on expenses until things improve–like not buying lunch every day or taking public transportation instead of driving everywhere.* Or maybe there are some areas where it makes sense for us as individuals but not necessarily as businesses; in those cases we should consider outsourcing those services instead.* For example: If I could hire someone else who could do my accounting work cheaper than me doing it myself would save me time and hassle while still keeping costs down overall.*
Make sure your expense categories are appropriate for you and your business.
As you’re creating your budget, make sure that the categories are relevant to your business. For example, if you’re a plumber and all of your expenses come from materials and labor, then “office supplies” would be an inappropriate category.
If there are some expense categories that don’t apply to you or are not relevant for tracking purposes (like “entertainment”), leave them out entirely so that it doesn’t confuse the data in other areas of the spreadsheet.
Make room for “fun money.”
You need to be able to spend money on yourself. This is a big one, and it’s important not to feel guilty about it. You want to be able to do things that make you happy, take care of your body and mind, and enjoy life! If this means taking a yoga class (or going out for drinks with friends) then so be it! It’s also fine if this means buying something frivolous–and even better if that something frivolous makes other people jealous when they see how cool/stylish/funny/clever it is.
If your business doesn’t have enough cash flow yet, try keeping track of every dollar spent on non-business related expenses during the month–whether it was a coffee from Starbucks or an Uber ride home after working late at night–and then add up all those small amounts at the end of each month before paying yourself any salary or bonuses so that there is enough left over for personal spending money each pay period (and some extra).
Set aside money for taxes and insurance.
One of the most important things you can do to keep your company running smoothly is setting aside money for taxes and insurance. This is especially true if your business is still new, since it will take time for you to build up a solid customer base and generate revenue that covers all of your expenses.
Setting aside funds for taxes depends on how much income tax you expect to pay during the year, but generally speaking, it should be at least 25% of your gross revenue from last year’s tax return (or 15% if this was an off-year). If this seems like too much money for now, consider scaling back some expenses until it gets easier later on–you don’t want any surprises come April 15th!
Insurance payments will vary depending on what kind of coverage(s) are required by law or industry standards; however there are two types every small business should consider getting: property/casualty insurance against property damage or loss due to fire/flood/etc., as well as workers compensation insurance which provides medical care coverage for employees injured while working at their job site(s).
Review your budget regularly to make sure that it still works for you and your business.
Review your budget regularly to make sure that it still works for you and your business.
If the budget no longer helps you achieve your goals, or if it’s causing problems in other areas of your business, then it may be time to make some changes. You should always have a plan B ready in case things go wrong–and this is especially true with budgets!
Small businesses can successfully create budgets!
Budgeting is a good way to plan for the future, and it can help you make better decisions. It’s also a great way to save money, avoid debt and reach your goals.
If you’re not sure where to start with budgeting or if you want some tips on how to create a budget that works for your business, we’ve got some tips below!
We hope that you’ve found these tips helpful and that they will help you create a budget that works for your business. Remember, the most important thing is to stay organized and keep track of your expenses. If something comes up unexpectedly, like an emergency repair or a new piece of equipment, it’s always better to over-plan than under-plan!
