Many small business owners feel that their business is too small to warrant a business budget. Whether it is a micro-business or a chain of corporations, every business needs a budget. Small businesses especially benefit from a business budget as it assists them to monitor spending, make decisions, and essentially ensuring that their business has a successful future.
We highlight six of the reasons why every small business needs a budget and the steps to take to create your business budget. SureBooks is a small business accountant that will provide you with an accurate budget and professional financial management for your small business.
Reasons Why Your Small Business Needs a Budget:
We have highlighted a few of the important aspects that demonstrate why every small business needs an accurate business budget.
1) Monitor Spending:
One of the most useful aspects of creating a budget for your small business is to monitor your business spending. A business budget will demonstrate your cash flow, available capital, expenses, and anticipated revenue, and this will all enable you to make spending decisions that are within the scope of the finance of your business. The way you spend money every month will either transform your small business into a success or leave you with no other option than to close your doors.
When faced with an unexpected expense, you can also use your budget to manage your spending in other facets of your business. Perhaps one month your employee decides to leave your small business, and suddenly you have to outsource to services which charge a higher fee. You can then assess your budget and decrease your expenses in other areas to accommodate for this change in costs. A budget, therefore, not only allows you to monitor your spending but also find other areas to save money should you need to.
2) Make Decisions:
Small business owners have to make decisions for their business daily. You want to make sure that the decisions you are making are ultimately benefiting your business and securing the future of your business. A budget enables you to make accurate decisions based on the reality of your income, expenses, and expected revenue.
An accurate budget also enables you to make decisions for your small business faster. Is your small business doing exceptionally well and you are considering hiring an additional employee to increase operations? A budget will provide you with an immediate overview of your cash flow and the financial health of your business, and quickly you will know whether you can then get in contact with a recruitment agency or if you should hold off for a few more months.
3) Understand Financial Health:
Consistently monitoring your small business budget will provide you with an accurate overview of the financial situation of your small business. You can evaluate whether your business is performing optimally or if there are adjustments that need to be made to increase the financial success of your business. A clear understanding of the financial health of your small business is always critical, and will also enable you to make better decisions for your business.
4) Strategic Planning:
Small business owners consistently need to look towards the future of their business and implement strategic planning. A business budget will enable you to strategically plan for the future of your business, such as deciding to invest this year or expand in the next few years. It is important to continuously assess your business budget and allow for changes that match your changing strategic business plans and the industry market.
5) Evaluate Performance:
Your budget will provide a record of your business performance over the last few months or years. You can then compare your yearly budgets to create a benchmark for the performance of your small business, and then use this benchmark to compare your small business’s performance with your competitors. Your budget will also demonstrate your key performance indicators or the key drivers behind either the success or current financial strain of your business. You can then use your performance information to aid your business decisions.
6) Determine Business Goals:
Continuously monitoring and assessing your budget will enable you to determine reasonable goals for your business. Are you aiming to expand into a global business in the next four years? Would you like to own more equipment by the end of the next year? These are all goals for your small business that can be reasonably created based on your business budget.
Once you have your forecasted revenue expectations and expenses incorporated into your business budget, you can then use your budget as a demonstration of your business goals to your employees. A budget essentially demonstrates the reality and the vision for your business and will assist employees in understanding the role they play in your business.
How to Create a Business Budget:
Creating a business budget can feel daunting and overwhelming. We are here to make the process of creating a budget for your small business efficient and simple. Follow our easy step-by-step guide to creating a business budget specialised to suit your unique small business.
1) Select a Budget Template:
If you have never created a business budget before, you will firstly need to select a business budget template. A budget template is an easy-to-follow outline of a basic budget. The budget template will allow you to fill in all your business budget details in a clear and easy-to-understand format. Google Sheets, Smartsheet, and Microsoft Excel offer a variety of digital budget templates that you can select from for your small business.
2) Forecast Expected Revenue:
When you create your business budget, you need to create a forecast of your expected revenue. A forecasted expected revenue is an informed and calculated estimation of what you can reasonably expect your business to earn in a set period. Forecasting your expected revenue assists you with budgeting for your expenses, attracting investors, performing strategic planning, and managing your cash flow, among other benefits.
Forecasting expected revenue can be difficult for small businesses, especially start-up small businesses where there are no existing revenue trends to review. Initially, we recommend doing in-depth research on your industry and competitors and forming an estimated amount for your expected revenue. Once your small business has been operating for 1 – 2 years, you can then compare your expected revenue against your actual revenue and alter your budget as necessary.
3) Determine Your Fixed, Variable, and Semi-Variable Costs:
Your budget needs to include an accurate record of your fixed, variable, and semi-variable costs so that you can rely on the budget for decision-making, future planning, and tax preparation. Your business expenses will need to be categorised into fixed costs, which will not change monthly, and variable costs, which will fluctuate every month. You may also have semi-variable costs, which are expenses that contain a fixed and variable element, such as your set phone contract amount and any extra expense you incur if you need more airtime or data. Once you have determined your costs, you can compare them to your expected revenue and craft an accurate budget.
4) Allocate an Emergency Fund:
One of the things that the COVID-19 Pandemic has taught small businesses is the importance of an emergency fund. An emergency fund for businesses is an amount of money that is set aside that can only be used for business emergencies. If your business goes through a period of negative cash flow, accrues an unexpected expense, or is presented with an investment opportunity, the emergency fund can be used as a safety net in these circumstances or funding for new revenue opportunities.
When budgeting for an emergency fund, it is important to set a monthly goal that needs to be adhered to. A recommended amount for an emergency fund is between 3 – 6 months of business expenses. We suggest that you set up an automatic transfer of your budgeted amount and keep your emergency fund in a high-interest-bearing account.
5) Have a Budget Summary:
A budget summary is a small overview of each budget category. The budget summary should contain all the relevant financial information regarding each aspect within the budget category. A budget summary is optional, but it is highly useful as it provides a financial resource for bookkeeping purposes.
If you still feel uncertain as to how to create an accurate budget for your small business, you can acquire the assistance of a small business accountant. SureBooks is a small business accountant that understands the importance of a business budget for the success of small businesses. SureBooks small business accountant will create, monitor, alter, and handle your small business budget for you, ensuring that when it comes to your business budget, you have peace of mind.
About SureBooks Small Business Accountant:
At SureBooks small business accountant, we understand the value behind an accurate business budget for your small business. A budget will ensure that you are making the best decisions for your business and make sure that you are always working towards a successful business future. With SureBooks, we will offer a valuable service that will craft a budget that will be communicated to you, monitored consistently, and ensure that your bottom line is continuously growing.
SureBooks small business accountant offers professional accounting services to handle your business budget and all other financial management requirements. SureBooks is comprised of a team of qualified, experienced, and dedicated accountants that are ideally suited to handling small business accounting. We offer small business accounting services that you can trust to be the perfect partnership for your small business.
We offer small business accounting services to small businesses to make running a financially successful business easier, and handling your business budget is just one of the important steps. We additionally will handle your bookkeeping, tax, payroll, and other accounting needs with our accounting and payroll services. With SureBooks small business accountant, you receive a total solution to your small business accounting requirements.
SureBooks small business accountant understands the financial pressure that is attached to running a small business. We offer accounting and payroll services at an affordable rate so that every small business can afford the professional and efficient services of SureBooks small business accountant. With SureBooks, the financial needs of your small business will always come first.
If you are interested in partnering your small business with SureBooks, you can simply contact one of our friendly assistants and we will begin the process. If you do not have time to have a conversation about our small business accountant services, you can fill in our quick onboarding form and request a call-back at a time that suits you. We make partnering with SureBooks small business accountant effortless so that you can get your business finances under control quickly and simply.
SureBooks is a small business accountant that will handle your small business budget efficiently, professionally, and accurately.
