Budgeting is important for any small business because it enables you to come up with an estimation of what is needed in terms of dollars. Estimating and matching expenses to revenue (real or anticipated) helps small business owners to determine whether they have enough money to fund operations, expand the business and generate income for themselves. Without a budget or a plan, a business runs the risk of spending more money than it is taking in or even not spending enough money towards the growth of the business.
Planning the budget
Check the industry standards
Do some homework and check your local library for information about the industry, talk to local business owners etc. This will enable you to have a rough idea of the industry, not specifics.
Make a Spreadsheet
You need to construct a spreadsheet to estimate what total dollar amount and percentage of your revenue will need to be allocated toward raw materials and other costs. This should be done for other expenses too like Rent, Taxes, Insurance etc.
Look to cut costs
Consider cost cutting, look for items that can be controlled to a large degree. You can also wait to make purchases until the start of a new billing cycle or take full advantage of payment terms offered by suppliers and any creditors.
Factor in some slack
Note that, though you may estimate that you will generate a certain rate of revenue growth, or certain expenses will be fixed/controlled this is not guaranteed to go the way you have planned. Therefore, it is important to factor in some slack and make sure you have more than enough socked away or coming in before expanding the business or taking on new employees.
Review the Business Periodically
Small businesses should review their businesses more often especially if their businesses are quite volatile.
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Shop around for services/suppliers
Shopping around for suppliers will enable you save money on other services being performed for your business. This can and should be done at various stages, including when purchasing or starting up a business, when setting annual or monthly budgets or during periodic business reviews.
Bottom line
Budgeting remains a key process that business owners use to forecast and then match current and future revenue to expenses. This is to make sure that enough money is available to keep the business up and running, to grow the business, to compete and to ensure that you have enough funds for emergency purposes.
Comments
66 responses to “6 Tips to a better small business budget”
To me sticking to a budget is peace of mind.
Hi Melanie, true, a budget can help avoid impulse buying.
Thanks for laying this all out. We are at the very beginning of our business and this is helpful to know.
Am glad you found this article useful.
I really appreciate your article. I have found it useful. Thank you for sharing your helpful thoughts. take care
You are welcomed!
Having a spreadsheet helps a lot when it comes to budgeting, especially for small businesses. The article is properly articulated.
Thanks for the feedback.
My husband makes a spreadsheet for our bussiness and houshold budget. I like beacause it gives you a realitic visual of your finances.
Thank you,
Naomi
Thanks for highlighting that key point.
[…] You can also read: Tips to help you create a better small business budget. […]
It’s important to analyze your business finances several times a year and make sure you’re keeping on track. Great advice here. I would also add that visualizing your expenses and income (turning them into graphs/charts) can help you absorb more of what is happening and really get a good handle on your business.
Hi Kat, thanks for the additional tips. Most welcomed.
I need to remind myself regularly to keep my eye on the bottom line. ALWAYS!
Hi, thanks for visiting.
Really glad I found this just before embarking on a small business venture
Welcome.
Great article and to the point. starting a small business can be stressful and you will run into cash problems, good info on planning here!
Thanks for reading. Welcome.
These are good tips and excellent disciplined activities to put in any place for any new business. Great post
Hey Cheralle, am very grateful for reading and taking time to comment. Most welcomed.
Love reading posts like this. Planning is so, so important, maybe even more than actual execution
Hi Alice, thanks for reading.
Good and practical tips..Hopefully some works for one and not for another..But definitely can be given a trial.
Hi, thanks for visiting.
I love these articles, always gives me little bit of sense what I need to do and be prepared for 🙂 Thanks!
Welcome.
Hey John,
Thanks for sharing these tips with your readers. 🙂
Hey Shruti, thanks for dropping by.
Thanks for sharing these tips, John.
Shared it with team members 🙂
Most welcomed.
Muy buenos consejos si vas empezando un negocio
This is good stuff. A lot of people avoid this aspect of their business to their detriment. It stresses me out, too. But, it is extremely necessary for a successful business. You’ve made it so simple that it takes a lot of the anxiety away by making it seem so doable. Good post.
Hi Lauren, thanks very much for the comments.
thank you for sharing this information with us.
we are very glad to inform you that it is very useful for us.
Most welcomed.
My small business has an on and off season. Therefore I know that I may end up spending more money than I bring in at that time. I usually make it all back and then some. I’m going to start keeping a record of income and expenditures.
Am glad that you found this post helpful to your business. Thanks.
To me, focusing on
-Look to cut costs,
– Review the Business Periodically,
-Shop around for services/suppliers
What matters to control the budget coz these three play an important role in reducing the budget to its minimum.
Hi Shaalan, thanks for the additional tips.
I appreciate these tips! It can be so hard to keep a budget, but this helps.
Welcome.
This is definitely great information for those of us who are new to entrepreneurship. Thank you for sharing!
Welcome.
I’m just starting so this advise is very timely. Good thing I love spreadsheets.
Thanks Pernille for visiting.
Great advice thanks
Welcome.
Very helpful post for those who are trying to setup a small business.. great read must say
Thanks for your comments.
Thanks for sharing such a useful post! Keep up the good work! 🙂
Welcome.
Good, general tips that all can use. I am very close to purchasing a small business myself, so I need all of the guidance I can get
Hi Bryan, thanks for visiting and taking time to comment on this post.
Very good info. I needed this, Thank you very much for your business advice
Most welcomed.
Great tips. I really liked the one about reviewing your businesses plan often. That is very important for small business.
Hi Nikos, am glad that you’ve picked something key from the post. Thanks for visiting.
Really useful guidelines. Thanks for sharing
Welcome.
Hey John,
Great post that’s short, sweet and straight to the point ?
In my experience, we all need to budget more. And these tips are practical, down to earth and will be very useful to anyone wanting to lay a solid foundation for their business.
Thanks for taking the time to share.
Best regards,
Pedro
Hey Pedro, am grateful for visiting again and taking time to make insightful comments. Welcome.
Great advice. I truly think those who is thinking of starting a small business need to read this so they get off to a good start and have the knowledge for the future.
Hi Roland, thanks for your insightful comments.
I’m impatient so I’m bad at the “shopping around” part haha!
Ha ha, not that bad maybe asking say a friend can still work.