Five Steps to Balancing Your Business Budget
Do you know your burn rate? Asked another way, “Do you know where every dollar your company spends goes?”
If you answered yes, then you know how empowering it is. Knowing how and where we spend our money can remove a lot of anxiety when the budget is tight or we are short on money. If you answered NO, then it is time to develop a simple business budget.
There are many online resources such as Xero, Quickbooks, and Freshbooks that can help you with this task.
Why is a budget important? It provides enlightenment, which leads to better business decisions, facilitates future growth and increases profits.
Here is a simple 5-step plan to creating a balanced business budget:
Step 1: List All Income Sources
The first element of a good business budget is figuring out how much money you bring in on a monthly basis. Start with your sales figures first, and then add other income sources you use to run your business.
Step 2: Determine Fixed Costs
Fixed costs are expenses that are charged the same price each month. As you can imagine, incorporating these is by far the easiest part of creating your business budget.
Step 3: Include Variable Expenses
Items that don’t have a fixed price tag each month are called variable costs.
Many of these purchases can be scaled up or down depending on the state of your business, using your monthly profit. Your profit each month will be determined by the earnings you’re left with after paying all your costs.
Step 4: Identify One-Time Spends
Examples of one-time spends include the purchase of a laptop or company vehicle. With a budget you can better prepare for such expenditures
Step 5: Create or Download a Budget Template
The last step is simply pulling it all together. Creating a business budget may seem like a hassle, but once complete you will feel relieved of cluttered thoughts about your financials. To make it easy, we’ve attached a simple budgeting tool for your use. Click here to download the sample budget.
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