Do you keep a very close eye on how much money your small business spends on a regular basis? If not, you’re asking for trouble.
Recent surveys have shown that well over 50% of small businesses operate without a budget. And in many cases, that results in these businesses spending more money than they should month in and month out.
It can be challenging coming up with a business budget and sticking to it. But business budgeting is very important for all companies since it keeps them on the right track at all times in a financial sense.
If your business is going to try and work your way through the budgeting process, there are some business budgeting tips you should keep in mind while doing it. Take a look at some of these tips below and start using them to save money each month.
Begin by Figuring Out How Much Income Your Business Generates
About how much money does your small business make every month? You might be surprised to hear that a lot of small business owners don’t know the answer to this question off the top of their heads.
If you aren’t sure how much money you’re making every month, it’s going to be impossible for you to create a business budget that keeps your spending under that amount. It’s why one of the best business budgeting tips is to sit down and find out what your business is bringing in every 30 days.
Outside of looking at the total amount of money that your business makes, you should also check out where all of your income is coming from. This might give you some good ideas as far as how to generate even more income as you move forward.
Write Down the Fixed Costs Your Business Faces
Once you’ve figured out how much income your small business makes each month, the next thing you’ll want to do is write down all of your different fixed costs.
Fixed costs are the costs that you know are going to be there every month. They include things like rent, payroll, and website hosting. You know how much they’re going to cost and they don’t ever change.
These are going to be some of the first things that you pay for with your business income each month. You should, therefore, be familiar with them and know how much they’ll cost you right down to the penny.
Estimate the Variable Expenses Your Business Accumulates
Most small business owners are at least vaguely familiar with their fixed costs. But it’s their variable expenses that end up getting them into trouble. These expenses change every month and sometimes throw small business owners for a loop when they least expect it.
Some of the variable expenses that you might face include:
- Electric and water bills that are based on usage
- Fuel costs that are based on gas prices
- Travel costs that are based on transportation prices
Even something as simple as office supplies can be considered variable expenses. You might buy toner cartridges through one supplier and spend a fortune on them one month and then buy the same toner cartridges through Premiumtoners.com the next month and save a lot of money. That’s going to have a bigger impact on your bottom line than you might realize.
Account for the Unexpected Expenses Your Business Deals With
Every so often, there are going to be unexpected expenses that pop up out of nowhere and catch you completely off guard. You probably know some of the expenses that we’re talking about.
The toilet in your business is going to give out on you and force you to call a plumber. Or your website is going to go haywire and make you call on an IT professional for help.
Whatever the case, you shouldn’t ignore the fact that there are going to be unexpected expenses that’ll rear their ugly heads at times. You should look back at how often these expenses seem to appear and account for them so that they don’t catch you by surprise anymore.
By doing this, you can stop these expenses from wreaking too much havoc on your business budget.
Put Everything Together and Look for Ways to Scale Back Your Expenses
After you have all of your income and expenses worked out, it’ll be time to put everything together into one big pot and mix it all up. You’ll have to make some tough decisions as far as how much money you can afford to spend every month on behalf of your business based on your income versus your expenses.
There is business budget software that will make it easy for you to do this. You can monitor how much money is coming in and how much of it is going out so that you can tweak your budget overall. It’ll work wonders for how your business spends money from now on.
Once you’ve used your business budget for a few months, you can begin to scale back some of your unnecessary spending and putting money-saving tips to good use. You might be shocked to see how much extra money you’re spending on things your business doesn’t absolutely need when you take this approach to business budgeting.
The key from that point on will be to stick to your business budget as best you can. It’ll pay off for your business in a big way once you get rolling.
Operating With a Business Budget Will Help You Make More Money Over Time
Creating a business budget isn’t going to be a whole lot of fun for many small business owners. But after you have it set up, you’ll appreciate how helpful it can be when running your business.
You’ll be able to make sense of your income and expenses more effectively and manage them better than you have in the past. You’ll also notice that you’re able to keep more of the money that your business makes when you have a budget handy.
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