Budgeting tips

When you begin preparing a budget for your business, you need to set aside time to base figures on reasonable expectations. One of the best places to start when working on your budget is to speak with your accounting department. Your accountant should be able to give you baseline figures from prior quarters and can help anticipate sales and expenses. Here are some budgeting tips to help you get started:

Start with a Time-frame
Most businesses prepare budgets based on a fiscal year. Depending upon your type of business, you may want to prepare a budget on a monthly, quarterly, or semi-annual basis. It is nice to have a fiscal budget and a monthly budget in tact that you can refer to. That way you can decide if your sales were slow in January, perhaps the next promotion you run will help to offset those costs.

Income and Expenses
If your business has been established, it is much easier to estimate your income based on numbers from the previous year. Your income will include any payments you receive from sales, accounts receivable, interest, dividends, or any other source. Your expenses will include purchase of materials, payroll, administration, real estate, utilities, etc. Always leave extra room in the budget for expenses. There may be a time when unexpected purchases arise and without a little added money in the budget, you could be hurting the company.

Many companies work on a seasonal basis such as lawn care and snowplow companies. If you have a business that retains all their money in 4 months, budgeting your annual income evenly over 12 months will not accurately represent your situation. For a budget like this, you will have 4 months of large revenue and 8 months of smaller revenue, or no revenue at all.

If you are a smaller business and you are looking for a few ways to cut costs, try some of the following tips:

• Buy in bulk. Check Costco and Sam's Club for prices on things you normally order such as cheese or flower. The shipping cost you save yourself will add up quickly.


• Don't throw away ink cartridges. Try purchasing an ink refill kit or go to a store that will refill your ink cartridge.


• Use both sides of the paper for draft articles. Instead of tossing that paper, re-use it so you aren't going through so much paper.


• Join free mailing lists or purchase "how-to" guides to reduce costs you spend on marketing with an agency. You may even find it easy to learn some of the programs graphic designers use.


• Eliminate "wasted" expenses such as name-brand pens. While the gel-pen is nice, there is nothing wrong with the old Bic brand pens.

Of course one of the best things you can do for your company is to know your cash-flow situation. If you are responsible for creating the budget, you better be on top of your cash flow. The cash flow is the life blood of a small company. If you find your cash flow situation is in poor condition, you should try implementing factoring or another alternative to collect on past due invoices. Many companies struggle with collecting money from their customers. Implement a policy now that discusses the invoicing process, how the invoices are created, how much time customers have to pay them, and when they become past due. Make it known to your customers that you will assess a fee for late payments. This is one of the best things you can do for your budget. If your customers are good about paying up front or on time, you can project your income and expenses with solid numbers.