Whether your business is still in its fledgling stages or has been operating for years, a budget remains important and vital for providing a guideline for expected income and expenses throughout the year. A well-planned budget can help you compare your anticipated financial goals with actual numbers, serving as a measuring tool for how well your business is performing.
Budgets can be paper and pencil, using a computer spreadsheet program, or with accounting software like . A yearly budget is helpful for establishing a big picture but breaking this down further into a monthly budget can help you stay on track and give you more data to compare from year to year.
A key component of a budget is inputting unchanging expenses such as rent, loan payments, or pre-paid costs. These are your fixed costs, with changing expenses such as utilities and supplies being Variable Expenses. Your budget from 2017 in comparison with your actual totals can help you budget for your variable expenses in 2018. Keep in mind any increases in expenses, such as the recent hike in postage costs that may make this different.
Income is another category in a business budget. You can forecast your income and any other expected revenue sources under the budgeted subheading for income. The numbers you inserted into the actual column in 2017 and prior years should help you make a better estimate for income for 2018. If your numbers were way off last year, it is important to identify the reasons for the difference and plan your 2018 budget with these differences in mind.
If necessary, use your past year’s budget compared with actual numbers and meet with a trusted CPA or financial advisor to come up with a better budget for 2018. This person may be able to help you implement a budgeting system that works best for your means, while also helping you determine business expenses that need reducing or may be nonessential, helping you to increase your cash flow.