Budgeting for your business can be stressful and overwhelming. Crunching numbers and counting pennies are not the aspects of business ownership that anyone dreams about when they first start pitching their ideas to investors. It’s hard to know where to begin when you’re staring at a stack of expense reports, payroll documents, and invoices. Thankfully, there are many resources at your disposal to help you learn about how to budget your business.
Here are six dos and don’ts of business budgeting that will help you build a more effective financial plan for your company.
Do: use resources to your advantage
The Internet is full of free, helpful information regarding budgeting. Researching even the basics of budgeting your business can make a difference. Every notable business publication has an online presence that you can take advantage of, and there are many legitimate, quality resources online that are lesser-known. One example of an excellent budgeting resource is the business guide available from Divvy (https://getdivvy.com/).
Do: stay dynamic
The economic world is fickle and constantly in flux. Business owners need to stay on top of any changes related to their business or goals. Set budgeting goals and review them after a few months. Circumstances change, and priorities shift. A budget should be easy to stick to yet flexible enough to react when something new happens. The budget is there for a reason, but it may hurt more than it helps if it can’t change.
You cover your bases by revisiting your budget and goals every few months. This revaluation allows you to assess the market, monitor your situation, and remain realistic.
Do: be holistic
The budget for your business needs to include a multitude of components. It can be too easy to get tunnel vision when you’re excited about a new project or stressed about an old one. The budget needs to include more than just an arbitrary figure. It should consist of estimated revenue, costs, cash flow, profit, and taxes.
Being holistic does not exclusively refer to areas directly involving money. You should include qualitative sources like people in your budgeting process. The more opinions you solicit, the more robust your budget will be.
Don’t: be unrealistic
You might fly out the gate ready to stick to a tight budget. However, your business does not operate in a vacuum. There will be some unexpected hurdles along the way. You need to leave wiggle room in your budget. At the same time, you need to remain conservative with your profit estimates.
Budgeting is a tightrope walk between being conservative and reckless. Carefully navigate this line by being realistic about your finances. Nobody knows your business better than you. Remain grounded, and you’ll avoid any nasty surprises.
Don’t: neglect the numbers
Too often, business owners overestimate their ability to guess their budget. You can lose a lot in the cracks when you ballpark your finances. Instead, you should build your budget based on data. Use all the receipts, tax forms, and invoices you have to base your budget on facts.
Budgeting with quantifiable figures assists in projecting your future budget as well. If you notice the supply cost is going up by 15%, you can budget accordingly. This aspect of budgeting is called financial forecasting.
Don’t: stress too much
Worrying too much about the finances of your business can be paralyzing. The stress of taking an honest look at your financial situation should not deter you from starting a budget. Stressing about your figures will affect your decision-making and worsen the situation.
Even if you start small, you will make progress. In the long run, budgeting will remove stress. It provides the framework that will guide you and your business to prosperity.
Wrap up
Starting a realistic budget for your business is possible. As long as you remain diligent, grounded, and inclusive, you will do great. Do some research, follow along with economic news, and start operating your business with more resiliency.
