Budgeting for small businesses – how to plan your financial success

Creating and sticking to budgets is a great way to guarantee financial success for your business.

With the help of an accountant, you can accurately plan your business’s budget, ensuring that your finances are always in line.

So, how is it done?

Predict your expenses

The first stage of budgeting is collating all your predicted monthly business expenses.

This can be broken down into three parts:

• Fixed costs that stay the same each month, such as rent payments, certain bills, staff wages etc.
• Variable costs that change, including utility bills and supplies
• One-off expenses such as replacing broken equipment

By predicting your expenses, you begin to build a picture of your monthly outgoings.

Estimate your income

To balance your outgoings, it is time to figure out your income. This allows you to predict if you will be able to cover your expenses.

If you are an existing business, you can use previous data to help predict what your profits may be in the coming months. An accountant can help you to do this if you are unsure.

The process can be more complex if you are a new business.

It can be tempting to overestimate your profits, but this can set you up for failure. It is best to be conservative with your estimates, ensuring that you don’t spend more than you earn.

If you are unsure about this process, it is best to consult with an expert.

Predict your profit

From the above, you should be able to work out what your profits will be. The easiest way to do this is to take the expenses out of the income, to see what you have left.

If you are operating at a loss, it may be time to reevaluate your business plan.

You will need to either find a way to increase your income or decrease your outgoings by cutting expenses. If there are no clear ways to do this, it is best to get an accountant on board.

Whilst hiring an accountant may seem like an extra expense, they are trained to help find holes in your budgeting and business plan.

They will be able to help figure out where costs can be cut and direct you towards ways to increase your income.

If you would like help with your business budgeting, get in touch today.