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Better business budgets

businessmeeting30396676.jpgCreating a budget for your business can present some challenges.It is not always clear what you should do.Fortunately there are some guidelines that you can follow that will make creating your small business budget more manageable and more accurate.Here are some suggestions:

  • Look for like businesses and see how they made their budgets.Although no two businesses are exactly alike, businesses in the same industry share similarities.If you do your homework, you can find the basic budgets of these types of businesses (although it may not be a currently operating business).You can speak directly with local business owners to see if anyone would be willing to take some time to mentor you or walk you through some of the things that they did as they created and modified their business budget.You can even look to the IRS to get an idea of what the main budgeting numbers of your business should be.The IRS can give you an idea of what percentage of the revenue coming in will likely be allocated toward cost groupings.You are not necessarily looking for something that is going to spell out for you every specific detail of your business budget; you are just looking for ideas.
  • The next thing that you will need to do is put all of your budgeted numbers on a spreadsheet.On your budget spreadsheet you will want to estimate what total dollar amount and percentage of your revenue will need to be allocated toward raw materials and other costs.If you have not yet started operating your business, it is a good idea to contact any suppliers you plan on working with and making sure that your estimates on costs are right.Continue this process, doing the same thing for rent, taxes, insurance(s), etc.
  • When making any kind of budget it is important to be flexible.Most of your expenses are going to vary from month to month.So as you set up your budget, use averages and do not be too upset if you find that you are off a little bit each month.You should be planning on having enough left over at the end of the month after you have paid for all of your expenses so that you have what you will need to expand the business or maybe even hire some new employees.
  • Part of creating a budget may include the discovery that you may be spending more than you are making.If this is the case, you will need to look for ways to cut costs.There are a wide variety of options available to you when you are looking to cut costs, but just a few suggestions are to take advantage of payment terms (some suppliers may offer you a period where you can make payments without interest), to make purchases at the beginning of a billing cycle, and to identify which costs you can control and which costs you cannot control (fixed costs).Work first to lower the costs you can control and then see if there are any fixed costs that can be eliminated.
  • Change is good when it comes to budgeting.Do not be hesitant to re-draft your budget if you find that it is not working for you or that someone else may work better.Many small business owners find that they only use the same budget for a month or two before it becomes necessary to make a change.This need for change is especially prevalent in out volatile economy.Many budget items are simply educated guesses so if you can create a budget that it more accurate, do not hesitate to do so.
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