Owning a small business can be rewarding, but also risky. Often, many businesses fail over and over again because they simply run out of money by making the same mistake regarding their financial approach repeatedly. Yes, knowing the amount in your bank account can let you know if you’re selling enough products and services to make enough money each month. But this doesn’t help you steer your business toward success 1 year from now or even 10 years from now which puts into question how pragmatist you are to stay in the market to make your big ideas work and how safe it is with you running it as a person.
The ever proven way of keeping your business in motion in terms of financial flow is setting a budget for yourself and tracking your expenses. As a business person, this can help you stay on top of the health of your business and see what it will take money-wise for your business to succeed and grow over time.
Setting a budget and tracking your expenses helps you:
- Stay open. Consistently seeing your current operating costs and sales numbers helps you confirm you have enough money to keep afloat which is healthy for your financial approach.
- Deal with problems. Helps prepare you for issues that may come up, like a seasonal drop in sales or your rent going up which are likely most factors that affect businesses trying to stay up in the market.
- Grow. with proper budgeting, you can plan out steps to take your business to the next level and know how much it will cost.
Having your business expenses organized can also help you prepare for any taxes your business will need to pay and can as well help you stay on top of any deductions or write-offs you may be able to make.
Steps to setting up an effective financial budget for your businesses
In taking steps to set up a budget for your small business, you must at first
- Consider making a list of all your business expenses. This might include marketing, payroll, technology, equipment, vehicles (including mileage), rent, utilities, supplies, ingredients, travel, entertainment, and so forth. This especially is beneficial to people looking forward to starting a business in a particular industry. It gives you a good idea of what your expenses are or will be. Consider it as a future vision, just as to know what you are heading into and how financially disciplined and prepared you should be.
- The next step is to take note of which expenses are one-time, recurring, fixed, and variable. Expenses on a daily, weekly, or monthly basis must be taken into consideration and accounted for. This as well goes for fixed ones such as rents, staff salaries, and benefits and others which can’t be changed. You as a business person must not let these expenses get too high since you can’t cut them quickly if you’re not making enough sales.
Writing down these expenses helps you plan for when and how often you’ll need money for them. This can also tell you when you may have extra money for other important business needs, like hiring seasonal help and loads of other things necessary for your business survival. Always consider making a note of which expenses boost profits and pay for themselves. Perfect examples are online search ads which might mean though you need to increase your budget, they could also result in increased sales and profits which is a win-win for you and business growth.
Tracking expenses might seem overwhelming at first, but luckily for you, and thank goodness to technological advancements, there are numerous numbers of accounting software out there like Quickbooks, Xero, and Freshbooks which are always available to help bring you to ease in setting these things into motion. They allow you digitally sync your business accounts and credit cards so you can see all your expenses. They will also automatically itemize your expenses and profits into categories of your choice, like “payroll” and “marketing.” which will allow you to see how your expenses and profits have changed over time, what you need to adjust or cut to raise profits and maintain stability, and what sales numbers you must hit to reach your business targets.
Accounting software does a lot of things even cut down to help in planning your budgets, but not into details. So while at it, consider working hand-in-hand with a human account in setting your budgeting plan into a course such as steps like filing your taxes while your software program helps ease the burden on you two by providing you with all the information they will need.