Budgeting Always Tops a Good Business Plan
Is budgeting on your list of goals for the year? If you own a business, you likely have a variety of goals in mind for 2021. Maybe you want to expand your business, buy a new piece of equipment, hire a new employee or you want a bigger paycheck.
How do you know if you can financially achieve your goals? The road to achieving any goal is paved with hard work and a good plan. In business, one of the most important parts of that plan is a budget.
A budget is simply a financial plan that is an estimate of expected income and expense for a specific period of time. Budgets are usually set up on an annual basis. They start with taking into consideration the known — how much am I making and how much am I spending.
You might ask if I know how much I’m making and how much I’m spending, why do I need a budget? A budget is taking that information and turning it into a spending plan. It ensures the financial resources will be there to pay the bills, pay off debt, expand your business, and save for the future. A budget helps with a proactive approach to your financial success, instead of reactive financial stress.
There are many different ways to create a budget, however a simple start could happen in four steps.
- First, what is my revenue? How much money am I making?
- Second, you want to look at your cost of doing business. What are my business needs? What are my fixed costs?
- Third, what are my variables? These expenses that can change month to month.
- Fourth, plan on the unplanned, those one-time items like a new computer or replacing a cell phone. If 2020 taught us nothing else, we need to have an emergency fund set up.
Careful review and planning will help you set up a budget that is right for you and your business. Work with your bookkeeper and look at your business trends. Include room for growth and increased expenses. Be realistic.
Life is not perfect. Be flexible. There will be items that you go over budget on and hopefully some that you will be under budget on. A budget is a living document meant to give you financial insight so you can make the right decisions to achieve your financial goals.
Sharon Dubois is a NACB certified bookkeeper and co-owner of United States Bookkeeping Co. As a QuickBooks ProAdvisor, she works with entrepreneurs in a variety of businesses teaching them how to read and understand their company’s financial reports and how they relate to day-to-day operation of their business. In her spare time, she serves as paymaster for the Marine Corps League Detachment 918.
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