Budgeting is important for any small business because it enables you to come up with an estimation of what is needed in terms of dollars. Estimating and matching expenses to revenue (real or anticipated) helps small business owners to determine whether they have enough money to fund operations, expand the business and generate income for themselves. Without a budget or a plan, a business runs the risk of spending more money than it is taking in or even not spending enough money towards the growth of the business.
Do some homework and check your local library for information about the industry, talk to local business owners etc. This will enable you to have a rough idea of the industry, not specifics.
You need to construct a spreadsheet to estimate what total dollar amount and percentage of your revenue will need to be allocated toward raw materials and other costs. This should be done for other expenses too like Rent, Taxes, Insurance etc.
Consider cost cutting, look for items that can be controlled to a large degree. You can also wait to make purchases until the start of a new billing cycle or take full advantage of payment terms offered by suppliers and any creditors.
Note that, though you may estimate that you will generate a certain rate of revenue growth, or certain expenses will be fixed/controlled this is not guaranteed to go the way you have planned. Therefore, it is important to factor in some slack and make sure you have more than enough socked away or coming in before expanding the business or taking on new employees.
Small businesses should review their businesses more often especially if their businesses are quite volatile.
Recommended Articles & Resources:
Shopping around for suppliers will enable you save money on other services being performed for your business. This can and should be done at various stages, including when purchasing or starting up a business, when setting annual or monthly budgets or during periodic business reviews.
Budgeting remains a key process that business owners use to forecast and then match current and future revenue to expenses. This is to make sure that enough money is available to keep the business up and running, to grow the business, to compete and to ensure that you have enough funds for emergency purposes.
In today’s fast-paced work culture, meetings are both essential and overwhelming. From brainstorming sessions and…
In today’s mobile-first world, short-form video content is dominating social media. With average attention spans…
Image by Unsplash While we may not associate traditional, physical industries with digital marketing, there’s…
A trader's chances of success can vary greatly depending on their access to sizable funds.…
Image: Unsplash Habits are hard to change, as they are regular tendencies or practices you…
Artificial intelligence (AI) has really been a game changer for writers; it has revolutionized how…
View Comments
Love reading posts like this. Planning is so, so important, maybe even more than actual execution
Hi Alice, thanks for reading.
Good and practical tips..Hopefully some works for one and not for another..But definitely can be given a trial.
Hi, thanks for visiting.
I love these articles, always gives me little bit of sense what I need to do and be prepared for :) Thanks!
Welcome.
Hey John,
Thanks for sharing these tips with your readers. :)
Hey Shruti, thanks for dropping by.
Thanks for sharing these tips, John.
Shared it with team members :)
Most welcomed.
Muy buenos consejos si vas empezando un negocio
This is good stuff. A lot of people avoid this aspect of their business to their detriment. It stresses me out, too. But, it is extremely necessary for a successful business. You've made it so simple that it takes a lot of the anxiety away by making it seem so doable. Good post.
Hi Lauren, thanks very much for the comments.
thank you for sharing this information with us.
we are very glad to inform you that it is very useful for us.
Most welcomed.
My small business has an on and off season. Therefore I know that I may end up spending more money than I bring in at that time. I usually make it all back and then some. I’m going to start keeping a record of income and expenditures.
Am glad that you found this post helpful to your business. Thanks.
To me, focusing on
-Look to cut costs,
- Review the Business Periodically,
-Shop around for services/suppliers
What matters to control the budget coz these three play an important role in reducing the budget to its minimum.
Hi Shaalan, thanks for the additional tips.