If you're just starting a business you're probably ready to rush out and show the world your game-changing idea. But before you dive into a successful venture, you've got to make sure you don't jump into a financial mess-and that means budgeting. The word itself usually induces groaning. However, the points below are sure to make the process as simple and painless as possible so that your budget can help you anticipate problems, meet profit goals, and know how your company is really doing.
Ask other business owners
If you've never owned a business before, it might help to ask other business owners what they do to keep their finances in line, and research any standard budgeting practices for your industry. The U.S. Small Business Administration can help you iron out the basics and give you some ideas for best practices.
Sit down and fill in your information
Whether you're just starting out with a spreadsheet or use fancy business accounting software, this is the nitty-gritty. Enter in what you think you'll spend for fixed and variable expenses and what you think you'll earn based on data from prior months and years. If you're starting from scratch, this is where researching online or by asking around can help you plan for the right numbers. At the end of the budgeting period, enter in the actual expenses and income and compare how you did.
Don't budget to the last detail
The point of budgeting is to make sure you know where your money is going so you can keep your business up and running. As long as you have reasonable dollar amounts in each line item it's okay not to know where every last penny will go. You can't predict your financial future that closely, and trying to do so would waste valuable time you could spend on money-making activities.
Give yourself some leeway
That said, make sure some wiggle room exists in your budget, because while you might be well informed about your fixed and variable costs and what kind of money you'll have coming in, circumstances can change the whole game. And it's also no secret that unexpected costs will come up, or that great opportunities will arise that you'll want to be able to take advantage of in the moment. So make sure you have reserve cash.
Especially in a small business, it's important to go over your numbers every month even if you've budgeted for longer periods to make sure the expenses are low enough and the income is high enough to keep the company afloat. This is where the data will tell you if you need to cut costs. You'll also start collecting data about how your budget actually went so you can better prepare for the coming months.
These straightforward steps should demystify the budgeting process and show you that it doesn't have to be hard or complicated. If you do feel like it's too much to handle right now, there's no reason you can't get a referral to a CPA or ask a friend experienced with budgets to help. But however you plan your company's financial future budgeting can make sure it stays secure.