If you are looking for a way to get your small business budget in order or create one from scratch, you’ve come to the right place: This article looks at several tips for creating a healthy budget.
Tip 1: Understand the Purpose of Budgets
If you go into the creation of your small business budget with the wrong mindset, it will not be as effective. As a Forbes.com contributor put it, you should view a budget not as a means to “manage every penny spent” but as “a guide to assist you in making better spending decisions.”
Tip 2: Understand the Types of Budgets
With that said, different types of small business budgets have different specific purposes.
- Expense budgets forecast income and expenses in the short term. They take into account what it costs to run your business and how much it brings in on a daily basis.
- Capital budgets take into account more major purchases, such as real estate or equipment.
- Cash budgets track your company’s cash flow via payments and receipts.
A single business may use all three, but it is important to identify which budget you would like to build before moving forward.
Tip 3: Gather Your Data
Next, you can begin compiling data. If your business has a budget from the the previous year, look at it to see where your business came up short and where it exceeded projections. Additionally, review any other documents that can provide helpful information, like returns on investments or when your company experiences revenue lulls and booms.
Tip 4: Create Your Budget with Goals in Mind
It is important to be mindful of your business’s goals when actually creating your budget. Using the data you have compiled, make your budget precise enough to meet your goals but malleable enough to adjust to challenges, like lulls in revenue. If you have never made a budget before, using a preexisting budget template may be helpful.
Check out the rest of IRC Commercial Lending’s blog posts to learn more about budgeting and other aspects of the business world.