How to Create a Budget for a Business
Do you know how to create a budget for a business? Business owners are expected to know all there is to know about business, but sometimes that's just not the case. You can, however, learn how to create a budget for a business. And it's much easier than you may think. Follow this step-by-step plan and you'll have a workable budget for your business quicker than you can say debits and credits!
- Gather expense data. Gather all of your monthly and quarterly business bills together. You'll need to know your total monthly expenses to create a budget for your business that really works.
- Gather income data. Also gather your income information. Payments received from clients and customers, investments made into the business, stock dividends received, etc. Any kind of business increase should be included.
- Set up a tracking system. Create a simple budget spreadsheet in Excel or a similar software program. Create a worksheet for all of your expenses and include a column for the vendor name, due date, amount due, date paid, and the pay-off amount if this is an ongoing expense.
- Record payments faithfully. Be sure to enter every payment made on every expense so that you won't overpay a bill, and so you'll know exactly what money is going out each month. That's one of the most important reasons to create a budget for a business so be sure you complete this task without fail.
- Add a worksheet for your customers. A budget for a business is also a good place track your customer and client information such as company name, address, contact person, amount owed and invoices paid.
- Sort your expense data. Sorting your expense data by due date will help you track the order in which bills must be paid and help alleviate late fees created by late payments.
- Sort your customer data. Sorting your customers by date will help keep you apprised of the sales made to each customer each week or each month. If you need to locate a customer by company or contact name, you can easily change the sort criteria to help you locate what you need, then revert to the date sort for sales tracking.
- Analyze company profits. The greatest benefit of creating a budget for a business is that is shows you exactly how much profit you really earn every month or every quarter. Compare your monthly expenses to your monthly income and see which number is greater. If you're income is higher, of course, your business is earning a profit. But if your expenses are higher, you may need to adjust your business budget to better meet your business needs.
- Review your budget regularly. There may be months when money is slower to come in through sales, and you have to adjust how your bills are paid. Or there may be times when the income is greater, and you can apply added funds to paying off some expenses. Either way, having a viable budget for your business will help you see exactly where you stand financially, and help ensure your business is operating on a firm economical foundation.
- Use your budget to set financial goals. Creating a budget for a business will help you to stay on track with your financial responsibilities, but it will also help you set goals for the future of your business so you can plan for financial security down the road. Use your budget full and it will help you see where you need to cut expenses, where you might be able to spend a little more, and when you may need to raise prices or seek out new customers to increase your profits.
Learning how to create a budget for a business will help ensure your business success by ensuring your business operates in the "black" and by ensuring that you're always bringing in more money than is going out.