6 Helpful Ways to Help Budget Your Business Finances

Whether you just started a new business or you’ve been in operation for some time, you may never make progress without budgeting because it is a crucial component for your business.

There are various aspects involved in budgeting, and you need to understand how to handle each to help you stay on top of the game. Here are ways you can budget your finances for business growth and continuity.

Put Together All Your Income Sources

Tallying your revenue sources is the first step towards creating a successful budget. You should know how much money your business is generating each month and the revenue sources. In this case, put together all your income sources and create a tally to get a clear picture.

You can access your sales using an app cost estimator to determine your monthly income. Remember, you are calculating for revenue and not profits. Meaning, you need to calculate when all the money comes in from various streams before deducting expenses.

Ensure you stay consistent with this technique as you examine all your monthly income sources to keep track of financial trends. Also, make sure you consider all sources, no matter how much money you generate from each. It doesn’t matter whether the money is small or not. It all counts.

Determine Your Fixed Costs

After putting together all your income sources, you should now handle all your fixed costs. These are costs that you regularly incur as you operate your business. Ensure you get every necessary data to help you in the estimation of your fixed costs.

Such costs include taxes, rent, insurance, payroll, utilities, supplies, depreciation of your assets, and debts cleared. Review the costs and determine which one has remained consistent month to month.

This will help you get a clear overview of your fixed costs. After summing up your fixed costs, subtract your income to get the total fixed cost expenses.

Identify Variable Expenses

Variable costs are not fixed. They vary from month to month. You cannot avoid some of the expenses like utilities, office supplies, salary, replacement of office equipment, and marketing costs, among others, because they are necessary for business operations.

However, be careful about how you spend your money. You may need to limit your expenditures at times, especially when your profits are lower than expected. You can increase your expenses when your profits go high. This will have a long-term benefit on your business.

As you continue monitoring your variable expenses, you will notice how the expenses fluctuate and how they impact your business. With this, you’ll be able to make financial projections and make informed decisions with your budget.

Reserve Some Money for Unexpected Costs

Business expenses can be unpredictable. You might encounter one-time costs that you hadn’t budgeted for. Maybe, you plan to host a review meeting, and then all of a sudden, your air conditioner gets damaged. In this case, you’ll need to repair the AC or look for an alternative source within the shortest time possible.

This becomes easy when you have to cater to such unexpected expenses. Otherwise, you may end up spending money you never budgeted for, and this will be the beginning of financial strain for your business. Therefore, set aside some money and create a contingency plan in your budget.

Determine Your Profit and Loss Trends

Once you accumulate the information above, you need to put together all the components to create a profit and loss statement. This may come with a lot of anxiety, but it also opens your eyes to see your business’s financial trends.

By taking the time to assess where you are profiting and where you might be losing money, you can better determine what areas of the business need to be revamped, which ones should be scrapped, and where you might need to reassess funding.

You need to add your monthly income and expenses separately and subtract the expenses from your income. If you have profits, it means that your business is on the right track, even though you’ll need to keep pushing for more. If you find that you are in the hole each month, you will need to reevaluate your business and find ways to cut spending.

Create a Future Budget

This is the time to make a budget estimate of what you expect to get in the next few months or years. It is easy because you already know your business trends.

Before creating the budget, refer to your profit and loss flow for the previous months to understand how your business may turn out in the next months. Apart from budgeting for the future, you can also hire more staff and aim for more productivity and higher revenue.

When you begin budgeting for your business, start looking for places you are spending too much money on and find ways to cut that spending. After you’ve done that, look for places where you can allocate money that will help increase profits more quickly. 

The Bottom Line

Budgeting may not be easy, especially when you do not know how to manage your finances. Using the tips above will help you stay on course and make critical decisions to boost your business’s growth. If you are still unsure of where to begin or don’t know where to cut spending, it would be good to hire a financial advisor who can help you through this process.

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