Budget Basics for Small Business

You may be one of them but we find that there are many small businesses out there that do not even have a budget. And as a collection agency that works with small business, we find that kind of troubling.  A budget can mean the difference between being profitable and, well, not making a profit. And we all know what happens when our business cannot turn a profit.

Having even a simple budget can make all the difference in the world. Your budget is essentially your roadmap for the year or a given period of time, as we are sure you are aware of. And while you might be aware of what a budget is, you still might not have one.

If you do not know how much and where your revenue is coming from, that’s an issue that may not go away. And of course, of equal importance is where and how much money you are laying out in expenses. Having even a simple budget is something you should strive for this year of you don’t have one in place.

Here are a few tips for creating a simple budget for your small business.

First, be conservative. If you are new to budgeting for your small business, it is safe to stay conservative in the beginning. Don’t get too self-confident and let the numbers get away for you. Try to stay as lean as you can until you get a little more comfortable with the concept of budgeting. That includes not getting too aggressive with revenue projections while staying accurate on expenses.

A great start is what your numbers looked like in the previous year. If those numbers are all in a shoebox, pull your bank statements and at least calculate your total revenue that was deposited and estimate as best you can, what your expenses were. Your bank statement and credit card statements are a good place to start.

Review your budget.

It’s very important to conduct even a brief review of your budget on a regular timeframe. Many businesses look at their budget once a month. But we understand that for many that can be difficult because you may be running a seasonal business such as lawncare or landscaping. You’re in your busy season and extra hours in the day are short. Try to look at your budget quarterly. Even better, schedule out meetings with your bookkeeper or CPA months in advance so there are no excuses for conducting a review.

Get a snapshot of your receivables.

If you are looking at assembling a simple budget for your small business, you might not be thinking of the customers that owe you money. But think again. If your business always has a pile of invoices that have not come in on time, that’s money that you are losing and cash flow that is suffering. And that can throw your budget off. While you take the time to put together that budget, take equal time to run your receivables and see what invoices are outstanding.

Get help.

If you have never done a budget before for your small business or you just need some extra advice on how to create a new budget, consider calling in the experts. That can be everything from a bookkeeper to a CPA. A bookkeeper or an accountant will know how to set you on the right track, know how to set up the categories in your budget and if you keep them around, they will keep you on track and up to date if you choose one that is proactive. But it is ultimately up to you to stay on track.

The same holds true when you run your accounts receivables. If you find that month after month, you have customers that have not paid, and this continues to be an issue, one, it will affect your budget, but two, you need help. A smart move that can have a profound effect on the heath of your budget is hiring a reputable collection agency. If you are too busy to review your budget, you may be too busy to work on those overdue accounts. Let professionals assist you.

Be willing to adjust.

Adjusting your small business budget can go both ways. If you’re having a great year, beef up those numbers and adjust that budget. The same for when business slows down. If you have to pull back on your projections, as well as cut some of your expenses, you’ll need to make that decision.

Having a budget and reviewing it regularly, is the best way to get a consistent snapshot of the health of your small business.