If you're currently running a small business, most likely you're
operating on a modest budget. Whether you bootstrapped your business or you're
trying to recover from few loans you've made to cover your startup costs, it
has always been your priority to save up money as much as you can possibly can.
Sure enough, it can be difficult to track and manage your
expenses if you don't have a thorough budget plan. This is definitely true for
any unexpected business expenses that may arise, as they often do. If you want
to keep your business operating in the long run, you'll need to plan for both
permanent and unexpected costs, and then create and stick to a solid budget.
Here are some smart budgeting tips small business owners can
follow in order to keep their finances intact.
Don't expect that your business sales will live up to your
projected market potential within the first or second year of operation. Your
dream business may be awesome, but reality is often quite different. Even
though it can be a challenging task to project income since you don't have any
idea how your business sales will exactly go in any month, strive to be as
realistic in your projections as possible. It's better to underestimate your
potential business income than to overestimate when you come to budgeting.
Expenses that are considered important in any running business
include wages, taxes, rent or mortgage payments on the business property, and
operating expenses such as power, water, Internet, and phone bills. You may
also have legal obligations that incur a cost, such as registering your
business name. When you estimate your initial startup costs, include all the
important expenses for the first six months of your operation, as this will
give you ample time to get your business up and running. Even if your business
is just home-based, there will still be essential services and costs that you
need to cover in order to make your business thrive.
While it may be challenging to put up a business without
incurring any type of loan, it should be one of your priorities to minimize
your existing debts as soon as possible. Debts costs the business more in
interest repayments, so having a budget that has the business operating in the
black sooner is always a good choice. If ever you do take out a debt for your
business, see to it that you able to make repayments every month.
Make it a habit to keep some of your profits in reserve to cover
any contingencies. Work out a spending budget that spends less than what your
business is expected to generate. Even if your business is operating at your
home, do not pay yourself all of the profits each month. Instead, try to work
out a reasonable wage for yourself and pay it regularly, as part of the
budgeted expenses each month. Stick to your finalized budget and keep the
additional profits aside. That way, you'll have some reserve funds to cover the
times if your business' sales fall short unexpectedly.
