What is Business Budgeting, why every business needs one?

You may have heard it many a times to earn money, you need to invest some. And, when your business is in the early start-up phase, there would be many initial costs that oblige business owners to spend ahead of earning payments. So, it is imperative for a business owner to create a budget because it boosts financial capacity so they can afford the things needed to grow.

A business budget outlines a financial blueprint for the future related to the dividends and costs of a business. But, a budget is far greater than just financial numbers. Why do businesses need budgeting? A business that outlines short and long-term goals by establishing a thorough plan can build a road map for a successful business and open opportunities to expand. Similar to a household, a business has a few debt obligations and expenses. For example the inability to meet payroll, means employees will look for another job. A venture which is unaware of the cash flow is in no position to expand, seize investment opportunities or commit long term to suppliers or clients. Often in a startup, there is limited information to create an intelligent budget for a year. Business owners can start with pursuing monthly budgets and further moving to quarters. Once finances have been established business owners can pursue by building intelligent yearly budgets.

5 key steps for small business budgeting.

Step 1: Keep Score of Income from all sources

The top priority facet of a wholesome business budget is to comprehend the amount of money a business brings in monthly.

Small start-up owners can do themselves by analyzing the sales figures and then adding other income sources used to run the business. Established business owners can use technology tools for small business budgeting.

Step 2: Analyze the Fixed Costs.

There exist some expenses that are constant each month, such fixed costs should be determined.

Such fixed costs are easily calculated by deciding your bank statements or ledger.

Step 3: Take account of variable expenses

The facets which don’t have a fixed price falls into the category of variable expenses. The purchase of variable cost items can be scaled up or down subjected to a state of business (profit). The monthly business profit is calculated by the earnings business owner is left after paying all the expenses.

Step 4: Predict one-time spends

The biggest perk of creating small business budgeting is the ability to determine one-time purchases in a refined way.

Step 5: Combine it all

The first four steps of the post feature the aspects of a decent business budget, so the last step is to combine it all together. Business owners can use the below mentioned handy checklist with special examples.

Sources of monthly income

  • Hourly earning
  • Savings interest
  • Investment Income
  • Earnings related to product sale

Fixed Costs

  • Rent
  • Utilities
  • Salary of employees
  • Insurance
  • Internet

Variable Costs

  • Advertising
  • Travelling expenses
  • Raw material
  • Printing services

One-Time Expenses

  • Office Supplies
  • Software
  • Computer
  • Furniture

To ease small business budgeting there is a multitude of tools to streamline financial management processes.