Budgets are essential in life, although not everyone puts the concept into practice. Whether we are talking about personal finances or corporate finances, the principle is the same. More so, small businesses are not exempt from budgets. Perhaps, it is even more important for small businesses. After all, small businesses may not be able to afford to hire the services of an external firm or entity to do financial work – from budgeting to accounting.
Then again, the principle of budgeting is quite simple at the very roots. Practically anyone who is willing to learn can come up with a budget for his small business. If you think about it, if you were able to start up a business, then budgeting shouldn’t be that much of a deal. Here are some tips that can help.
Where do you start? A good place to start is to set a target. Estimate the sales revenue that you will be having for the year. Take into consideration the economic climate, among other factors, and make a reasonable estimate.
Next, estimate the cost of fixed expenses such as raw materials. This should be easier, especially taking into account your past experience. You should also factor in the variable costs, which includes business trips, sales commissions, and the like. Add these all up and then deduct the figure from your estimated revenue.
Another useful tip is to break down your annual budget into more manageable chunks – quarterly is a good idea. Lastly, make sure that you monitor the actual performance of the company quarterly as well. Compare it to the budget and make the necessary adjustments.
Originally posted on April 11, 2010 @ 11:13 am