Smart Budgeting Hacks For Your Small Business
- June 4, 2019
- By Aidan Dwyer
As any small business owner can tell you. Budgeting is one of the most critical tasks for maintaining a healthy business. As important as it is, budgeting is a very tedious and confusing project. Especially, for anyone who is not great at accounting. Below, we have broken down the budgeting process into four easy steps to follow:
Look At Your Revenue
As a business owner, while creating a budget look at all your income sources. Your income sources give you a sense of what your business revenue is. This is all of the money that your company is bringing in. Revenue is different than your profit. After deducting the expenses from revenue the remaining part is the profit. Depending on what kind of budget you are trying to make. Try to look at your revenue on a weekly, monthly, or yearly basis. You may want to use weekly revenue if you are looking to manage recurring payments. While you may use yearly revenue to find patterns and forecast sales.
Subtract Your Costs
Now that youâ€™ve seen how much money is coming in. Itâ€™s important next to look at the money leaving your account. You can divide these into either fixed or variable costs. When budgeting a business, determining your fixed costs and mitigating your variable costs is crucial to success. Fixed costs are any costs that your business incurs during normal operation. Some examples of fixed costs might be payroll, rent, and utilities. First, Subtract your fixed costs from your total revenue. Variable costs, as the name suggests, are costs that fluctuate depending on usage. When money gets tight, these are the first items that should get trimmed. But when money is good, you can use variable costs to expand budgets such as marketing and discretionary costs.
Once you have taken care of your fixed and variable costs. It is time to take money out of what is leftover. Your contingency fund is essentially a safety fund for anything that may come up, and something always comes up. These unexpected charges can be a huge blow to your business’s budget. Especially, if you did not prepare to handle them. If your budget does not look like it will have enough left over to cover a contingency fund for anything that comes up, you may consider taking out a Small Business Line Of Credit to have extra security.
Make a Bottom Line Profit and Loss Statement
After doing everything when you have taken into account every business transaction made over the period. It is time to make a final profit and loss statement. This is a very straightforward document stating exactly how much money your business made or lost. Also, this document defines profit loss for every certain period of time. If this final number is lower than where you want it to be. We recommend that you look into additional financing for your business. Looking for financing options? See which of our REIL Capital services are right for you! Â