Learn more about how to stay on track with your small business budget.
Once you have created your small business budget, you will have to try to stick to it. Most people love the world budget as much as they love the word diet. But if you think of your business budget as your financial plan for the future, you will have a more positive view of it, and hopefully see your budget as your friend rather than the enemy.
A budget helps a business to keep on top of everything that is going on in the business financially. Once you create the budget, have it on your computer desktop in an Excel spreadsheet and look at it every day, or at least once a week.
If you are relying on your business to support you and your family, don’t leave things to chance. And if you want to make sure you don’t let down any of your customers and any employees you might have, then that is all the more reason to keep track of your progress every week and every month.
There are a number of ways to keep track of your budget each month to make sure you are on target for all of your financial goals. Here are a few of the best ones.
* Using good software
This works for accounting purposes and taxes but also so that you can see a variety of warning signs before you get into real trouble. The software will help you see if you are spending too much, offering your product for too little or if you are over the budget in different areas.
Before buying any software, have an idea of what items you need to track to find a comprehensive program to fit all your needs. This includes time tracking and payroll software for employees. Quickbooks and Quicken are two popular accounting software programs which you might consider using in conjunction with Excel to keep track of all the numbers related to your business. Each of these programs has basic up to deluxe and professional editions, so compare features to see which version is right for your business. Also check to see if they work in conjunction with popular tax preparation software.
Other software you will need will help you track your inventory, your performance in selling online, and so on. Use software as the ‘dashboard’ to help you see what is going on with your business, but also remember to keep your hands steady on the wheel, keep your eyes and ears open, and take your feet on and off the gas pedals and the brakes as needed to keep your business on the road to success.
* Do a monthly evaluation at a minimum.
We personally look at our books on the 15th and the last day of each month to review the books and the budget, but if your income is fairly steady each month, once might be enough. If you have hired an accountant, you can make an appointment with them to discuss the bottom line. Prepare reports that can be archived, showing each month’s statistics. If you see on the 15th that you are having a good month, congratulations, and keep up the good work. If you see on the 15th of the month that things are slower than you anticipated, do more promotion, send out more emails and so on to try to generate more sales and revenue. Your budget will help you see how far off you are in meeting your monthly obligations and help you get back on track.
* Use credit to build credit and gain benefits
Banks extend businesses lines of credit that help owners keep track of their expenses through a monthly report that shows the tax categories in reference to where their money is going. You can use this line of credit to pay for capital purchases, business expenses like client lunches or dinners, supplies and so on. With your online account you can quickly reconcile purchases to a specific line item to balance it and see what is left. Just remember to keep all physical receipts for the IRS-credit card statements are not accepted as proof of the expenditure.
* Regularly evaluate vendor performance and pricing
If you are relying on other third-party vendors to help you run your business, check to see that you are getting value for money and good pricing. Don’t take this for granted. Just because you have been given a good price today doesn’t mean that your current vendor will be the most economical six months from now. Always run a check each quarter to see if things can be done faster, smarter and/or cheaper than your current practices. Check the costs of everything and if you are not satisfied with the service you are receiving, consider making a change.
* Use online banking to schedule payments and savings
Avoid late payments to vendors or other creditors by scheduling regular payments each month through automatic bill pay through your online bank. You can view your statements to see when the payments cleared. It keeps your credit rating high and also helps you budget better. You can also schedule savings into an emergency fund or investment fund for the future needs of your business. If the money is automatically saved in this manner, you will rarely ever notice it is there and not be tempted to touch it.
* Track inventory carefully
This is important for businesses that sell their own products. When filling orders, you want to know that you have all the materials in stock for production. Falling short could mean last-minute vendor ordering which might come with a hefty rush fee. You can cut back on items that customers aren’t buying, or eliminate them entirely. Just be aware of the inevitability of damaged goods and things being lost in the mail. Do what you can to offset these issues, but also recognize that these expenses will have to be funded by the company, as will a good customer service system.
Creating a business budget is just the first step, and the easiest one. Sticking to your budget will be much harder. However, if you use top technology and plan ahead for future expenses carefully, you should be able to not only stay on track, but survive and thrive in your business.