The “B-word”. Budgeting. A word that inspires trembling and fear. You and I both know that as business owners, budgeting is often one of those tasks that gets kicked into the closet to be completed “later”. Why is this? Should this be the case? The short answer is that budgeting is one of the most essential tasks you can undertake as a business owner. The powerful secret behind budgets is that they are relatively easy to setup and can lead to huge positive transformation in any business.
What is it?
What is a budget? A budget is a “roadmap” for your business. It creates a plan for your finances so that before the month even begins, each dollar already has a “place” to go. You (or preferably software) then track all of your income and expenses so that at the end of the month you have a picture of how much money you made and spent compared to what you predicted. The beautiful part of this is that it actually gives you MORE financial freedom. By knowing where your money is going, there’s no need to be stressed about normal expenses as they’re already “in the plan”.
The best part of a budget is what I call “bonus money”. If you plan to make $10,000 in a month, but make $14,000, if you’ve followed your budget all of your expenses are paid and now you have an extra $4,000 to invest in your business, take as profit, or do something else with. That’s the beauty, you have more flexibility because of the plan that is in place.
Budgets are extremely powerful, but how do you go about making one? There’s a few possibilities:
- If you want to DIY, all accounting software (Quickbooks, Xero, Freshbooks) will have budgeting sections that make it relatively easy to setup your own budget. If you don’t use one of these types of software for your business (think about using one) you can also download a plethora of spreadsheets online that can help provide a template. Here’s 15 examples to get you started.
- Don’t want to DIY? Your bookkeeper can help you set up your budget. Even better, a bookkeeping professional can help advise you and give guidance on how to create your budget and stick to it.
Conclusion – Quick Tips
Budgets are very much worth your time. Simply thinking about and filling out a budget is likely to help make your business more money and help you spend less. Budgets don’t have to inspire fear and trembling in you. Instead they can inspire freedom and flexibility. But don’t push your budgeting into next month, get started ASAP. The sooner you start budgeting, the sooner you’ll have control over your businesses’ finances. Four quick tips to leave you with:
- Update your budget monthly — Try to improve it and make it more accurate every month
- It won’t be perfect — You’ll go over on your budget categories, don’t be frustrated, just tweak it
- Ask for advice — Whether other business owners or a bookkeeper, ask for help, it’ll make your budget (and your business) that much better
- Think about a personal budget – A budget for your personal finances can work wonders. Use a free app like Mint to track your personal finances, you won’t regret it.
What do you think of when you hear the word “budget”? How have you seen budgets work (or not work) in your business and life?