Running a business without a budget is like navigating a ship without a compass. Setting aside time to examine and revise your budget periodically gives you more options when making important decisions about where your company should be going and growing.
Assess Your Finances
The first step in developing an accurate and reliable budget is to take a look at your finances. Review income and expenses. Previous records, financial statements and tax returns are important documents for reviewing.
If you’re just getting started, consider using a budget from a similar business as a model. An experienced accountant may be able to provide you with some samples and standard benchmarks for a business of your type.
Once you have compiled all your documents and information, list your expenses.
Consider whether you want to develop a budget for 3, 6 or 12 months. Create appropriate categories for all of your expenses: rent, wages, inventory. Always remember to set aside money for emergencies, slow business periods and economic downturns.
If your business is just getting started, you may decide to create a budget for a short time so that you can start to analyze your spending patterns, cash flow and inventory.
Examine Spending Habits
Analysing your spending trends and considering your finances will help you project amounts for each category of your budget. Always remember to routinely re-examine your budget.
You may want to create benchmarks for shorter periods. Budgets with benchmarks for month-long or 2-week periods can make the whole process easier to manage.
Review the numbers periodically and adjust them if your business conditions change.
Stick to Your Budget
Once you have a working budget, it’s important to stay on course and stick to it. Sharing it with your team, financial advisors and accountant can help you cruise successfully into the size of business you’ve envisioned for yourself.