Budgeting is not something that comes naturally to all business owners. In fact, managing business finances is one of the most common business owner struggles in the first year and beyond, regardless of whether or not they have online financial software to help them out. Learning how to budget money is a process that takes lots of practice. You have to build up will power to create a budget and then actually stick to that budget. If you want to learn how to budget money for your business, find out how to do it below.
Figure Out Your Revenue
The first step to creating a business budget is to identify your business revenue each month. That monthly revenue figure is the money that your business makes from sales each thirty or thirty-one day period. If you do not know how much money your business brings in, how would you know how much you can spend without going into debt? The simple as is, you would not. Make sure you get figures for your last couple month’s revenue to have a starting point for creating your business budget.
Identify Fixed Expenses
Identify your business’s fixed expenses. Fixed expenses are just that – fixed. They do not change from month to month. Common fixed expenses for business include rent, utilities, insurance policies and similar. These will of course depend on your particular business, however. Collect all the bills for monthly fixed expenses. Then, add those figures up to determine the total amount of fixed expenses your business incurs each month. This will provide you the starting point for your budget when learning how to budget money for business.
Estimate Variable Expenses
Next, you will need to estimate monthly variable expenses for business. These variable expenses vary from month to month. They do not occur in any type of regular schedule. These variable costs are entirely flexible based on your financial performance and business needs. Costs for things like office supplies, easy credit cards payments, corporate car gas and mileage or similar expenses would all be considered variable. Try to make an educated, informed, well-researched estimate regarding variable expenses your business may experience from month to month. This amount should also be set aside as a part of your budget.
Include Emergency Cash
Include an emergency fund in your business budget. Your budget should include a cash emergency fund that is available to cover unexpected expenses that crop up for your company. This money should be stored separate and apart from your regular business accounts. Open a separate business savings account to store your emergency cash fund once you budget for it. As long as you budget for an emergency fund every month, your business will be able to survive any hard times it comes upon in the future. This is certainly worth the extra budgeting effort.
Review your business’s budget every single month. You want to see how well you stuck to your budget. The only way to do that is to review your spending and budgeting every single month. This will also allow you a chance to make changes to your budget when it is necessary. Budgets are not always going to be the same. Your business is not always the same. Neither is your business cash flow situation. Your budget should not be static either. Make sure you review business budgets and spending each month, or at least every quarter. Your business financial health will certainly benefit from the attention.
Learning how to budget money is a process of trial and error. Much like writing, budgeting is a process. Business owners need to continually and consistently review and update their business budgets and web banking accounts. Otherwise, they will not be effective at helping you manage business finances for optimal financial health. Use the post above as a guide to learn how to budget for business. This budgeting how to guide includes all the details you need to create a basic business budget. Let us know how it works out for you in the comments below.