Are your business finances not behaving the way you expected them to? Is your workload increasing but not your profits or salary? If you want to have better control over your business’s finances and spending, it’s time to budget. Here are five simple steps on how to create a budget for your business that gives you control over your finances.
Step 1: Calculate Income Sources
Find out how much money your business brings in every month on average. To manage your finances, you need to make sure that your expected profits are realistic. Make a note of clients who provide you with regular work to calculate your base income. Don’t forget to include any other sources of income you might have, such as profits from investments.
Step 2: Determine Fixed Costs
Fixed costs are expenses that you need and pay for every month. These include rent, internet, and salaries. When tallying, there’s usually no room to reduce these expenses. Make sure that every fixed cost you pay for is worth your spend and accounted for. For example, you might be paying for parking spaces that you don’t use.
Step 3: Determine Variable Costs
Variable costs are expenses that vary each month. Your electricity, phone and utility bills will fluctuate according to usage and demand. Can you reduce some of your costs and make plans for future ones? For example, you could find a cheaper stationary supplier. You can also plan for a higher heating bill in winter.
Step 4: One-Time Spends
Try to predict expenses that might arise that are a one-off. Some costs are predictable, such as scheduled servicing of a company car. Others come out of nowhere, like having machinery stolen. Make sure you’re insured and create long terms savings for major future purchases. This can be upgrading all the computers in your offices to more modern ones.
Step 5: Compile It Together
Once you’ve compiled the above, you can see exactly where your money is being spent, and on what. Immediately you’ll see what changes you can make. In a few months, you should see a drastic improvement.
When your business has a solid budget, things run on schedule and bills are paid on time. Don’t you think it’s time to create one so your business can run more smoothly?
