Tips for Creating a Small Business Budget

Here’s some free budgeting advice to ensure your small business continues booming.

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You can’t predict the future and so many aspects about your small business are outside of your control: the weather, your customers, and employees who might now show up for work. 

Putting together a budget can help you plan for the unexpected. But call it goal setting, or financial planning, if you are struggling with the “B” word. You may or may not hit your budget goals for sales expenses and profits, however, without goals you may find yourself wandering aimlessly. 

One more drain to clean. One more septic tank to pump. And for what? Goals create a good game to play, and they help build businesses. As business philosopher Jim Rohn encouraged, set goals not for the achievement, but “for what it will make of you to attempt them.” 

Here are some tips for putting together your business budget: 

Getting started

  • Start by stopping. Stop whining about budgeting. Stop claiming you can’t do it or you don’t get it. Budgeting is your best guess at a sales and expenses plan for a future period of time.
  • Don’t worry about doing it just right. You can’t do it wrong. You will never create budget that is 100 percent accurate, and that’s OK.
  • Realize your power. Writing your goals — crafting your budget — actually sets your goals in motion. You have everything to gain and nothing to lose by budgeting. 

Tools to use

  • Your accounting program probably has a budgeting program in it. Use it. It will do the math for you.
  • Columnar pads are your friends. You know those green tinted sheets with the rows and columns inked in already? There is nothing wrong with using a pencil and paper to work out your budget.
  • Print your income statement (Profit and Loss or P&L) from the last two years. If you don’t have them, find your income tax returns. Your tax preparer created an income statement for your tax return. You can also have your checkbook register handy. 

Basic budgeting steps

  • There are two ways to approach the sales line of your budget.
    1. Set a sales goal and work from there.
    2. Fill in all your projected costs, and then see how much sales will have to be to cover costs and leave your desired profit.

If you start with the sales line, and there is not enough on the top to cover all the expenses you anticipate, you can go up to the top line and change your budgeted sales to make it work. Remember, the budget is a guess. You can move the numbers around.

  • Work your way down the list of costs and make your best guess. Reference your income statement, tax returns and check register to see how much you have spent on expenses in the past.
  • Be generous with your expenses. Put in lots of money for you and your team. Put enough money in so that you can make a few mistakes — you will — and not be resentful when you have to make a correction.
  • You can fill in the budget for the whole year, or month by month. Month by month is a more usable format when it comes to comparing actual performance to budgeted numbers.
  • The budget is just goal setting. It doesn’t need to be bound by strict accounting rules. You can budget for expenses you haven’t incurred yet. For instance, if you want to set aside money for buying a new truck, you can budget for it first, and then buy once you have the money saved.
  • Keep a budgeting log. You are going to pull some of your budgeted numbers from thin air. Write down notes to yourself as you come up with the numbers for your budget. When you refer to your budget in the months to come, you may forget your assumptions. 

Use it or lose it

Each week, compare your actual performance month to date, year to date, to your budgeted performance. If you are behind in sales, take action to crank up sales and to cinch down expenses. If you don’t refer to your budget until after the month is over, you may miss the opportunity to salvage a month. 

Go forth and budget. Don’t avoid budgeting because you are not sure that you know how. This stuff isn’t that hard. If you aren’t comfortable with it, you will avoid it. 

Put together a budget for this year — it’s not over yet. Check your progress against it each week. And have some fun out there on the steep slopes of business. 

About the Author
Ellen Rohr is the president of Zoom Drain and Sewer LLC, and is a columnist for Huffington Post, PHC News, and a contributor to many business journals and trade magazines.

Contact her at www.ellenrohr.com.



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