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.
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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.
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.
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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.
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To me sticking to a budget is peace of mind.
Hi Melanie, true, a budget can help avoid impulse buying.
Thanks for laying this all out. We are at the very beginning of our business and this is helpful to know.
Am glad you found this article useful.
I really appreciate your article. I have found it useful. Thank you for sharing your helpful thoughts. take care
You are welcomed!
Having a spreadsheet helps a lot when it comes to budgeting, especially for small businesses. The article is properly articulated.
Thanks for the feedback.
My husband makes a spreadsheet for our bussiness and houshold budget. I like beacause it gives you a realitic visual of your finances.
Thank you,
Naomi
Thanks for highlighting that key point.
It's important to analyze your business finances several times a year and make sure you're keeping on track. Great advice here. I would also add that visualizing your expenses and income (turning them into graphs/charts) can help you absorb more of what is happening and really get a good handle on your business.
Hi Kat, thanks for the additional tips. Most welcomed.
I need to remind myself regularly to keep my eye on the bottom line. ALWAYS!
Hi, thanks for visiting.
Really glad I found this just before embarking on a small business venture
Welcome.
Great article and to the point. starting a small business can be stressful and you will run into cash problems, good info on planning here!
Thanks for reading. Welcome.
These are good tips and excellent disciplined activities to put in any place for any new business. Great post
Hey Cheralle, am very grateful for reading and taking time to comment. Most welcomed.