How to best monitor your budget

Although a lot of small businesses still do their budgeting with a pen and paper, there are great budgeting softwares available. By using technology, you will be able to monitor your budget better because with only a mouse click you can look at you daily, weekly, monthly, and yearly budgets. What's more, you can use the software to estimate revenue and give you estimates of cash flow on all of these time line.

Quicken is a program that has been around for decades and many people learned to budget on Quicken in high school finance classes. If you have experience using this or any other program for your home finances, you will find that it is just as easy to use a business version for business budgeting and financial planning. If you haven't had experience with a budgeting program, you might look at the different budgeting software choices at your local software store. There are literally hundred of programs available. The key will be finding one that is user-friendly and suited for the type of business you are running.

Another idea for monitoring your budget, if you are not quite ready to computerize your business, is to download a budget planner. There are plenty of web-based companies from which you can download a spreadsheet that will help you budget your expenses. If you go to microsheet.com, you will find a simple downloadable budget planner. This Excel spreadsheet downloads in less than a minute and you will be able to customize it to meet your needs. Once it is ready, you can just type in your expenses (i.e., rent, utilities, and inventory) as well as your income expectations. Using a spreadsheet like this is an easy way to build your budget and it doesn't require many computer skills.

Once you have a budget in place the fun begins. You need to keep close watch on the budget at all times. If you predicted earnings of $5000 in the first month but you only made $3000, you will have to adjust the budget to reflect the reduction in revenue. Having a budget is almost meaningless if you don't monitor the budget carefully and make adjustments when necessary. When monitoring your budget there are a few questions that you need to constantly ask:

 Are you under or over estimating your income and why? To have a successful budget you have to know how much money you are looking at. If you are off in your forecast, find the underlying cause of the discrepancy and either fix the problem or adjust your budget.

 What does each budget section look like? You might end up right on target but only because you have underestimated one section of the budget and overestimated another. This does wash out but your still need to consider why you are over and underestimating the revenues and expenses of the various departments.

 Where are the fluctuations and why? In time, you will get an idea about the cyclic nature of your business. Sales go through high and low times; so does everything else. If you sell propane, you will sell more during the cold months than the warm months, if you sell swimming pools, you will sell more during the summers. Expenses are also cyclic. Your heat bills in the winter and the water bills in the summer are an example of cyclic expense changes. You will have better luck balancing and staying within your budget if you get a good idea of month-by-month changes in the budget items. At the end of every year, you should carefully consider the budget for the previous year. Note the deviations and change the new year's budget to reflect that movement.

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