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Business
Budgets are an integral part of running any business efficiently and
effectively. They serve as a plan of action for managers as well as a point of
comparison at the period's end. Budgeting is an easy but essential process that
business owners use to forecast (and then match) current and future revenue to
expenses. The goal is to make sure that enough money is available to keep the
business up and running, to grow the business, to compete, and to ensure a
solid emergency fund.
Importance of business budgets
Estimating
and matching expenses to revenue (real or anticipated) is important because it
helps small business owners to determine whether they have enough money to fund
operations, expand the business and generate income for themselves. Without a
budget or a plan, a business runs the risk of spending more money than it is
taking in or, conversely, not spending enough money to grow the business and
compete.
Major techniques for business
budgets
Every
business owner tends to have a slightly different process, situation, or way of
budgeting. However, there are some parameters found in nearly every budget that
you can easily employ. For example, many business owners must make rent or
mortgage payments. They also have utility bills, payroll expenses, cost of
goods sold expenses (raw materials), interest and tax payments. The point is
that every business owner should consider these items and any other costs
specifically associated with his or her business when setting up shop or when
taking over an existing business.
Steps to follow to make business
budgets
1.Check
Industry Standards
Not all
businesses are alike, but there are similarities. Therefore, do some homework
and peruse the local library for information about the industry, speak with
local business owners, and check the IRS website to get an idea of what
percentage of the revenue coming in will likely be allocated toward cost
groupings. Small businesses can be extremely volatile as they can be more
susceptible to industry downturns than larger, more diversified competitors, so
you only need to look for an average here, not specifics.
2.Make a
Spreadsheet
Prior to
buying or opening a business, construct a spreadsheet to estimate what total
dollar amount and percentage of your revenue will need to be allocated toward
raw materials and other costs. It's a good idea to contact any suppliers you'd
have to work with before you continue on. Do the same thing for rent, taxes,
insurance(s), etc.
3.Factor
In Some Slack
Remember
that although you may estimate that the business will generate a certain rate
of revenue growth going forward or that certain expenses will be fixed or can
be controlled, these are estimates and not set in stone. Because of this, it's
wise to factor in some slack and make sure that you have more than enough money
socked away or coming in before expanding the business or taking on new employees.
4.Look
To Cut Costs
If times
are tight and money must be found somewhere in order to pay a crucial bill,
advertise, or otherwise capitalize on an opportunity, consider cost cutting.
Specifically, take a look at items that can be controlled to a large degree.
Another tip is to wait to make purchases until the start of a new billing
cycle, or to take full advantage of payment terms offered by suppliers and any
creditors. Some thoughtful maneuvering here could provide the business owner
with much needed breathing and expansion room. (To get venture capitalists to
invest much-need capital into your company, see Fly High With Angel Investors.)
5.Review
the Business Periodically
While
many firms draft a budget yearly, small business owners should do so more
often. In fact, many small business owners find themselves planning just a
month or two ahead because business can be quite volatile and unexpected
expenses can throw off revenue assumptions.
6.Shop
Around for Services/Suppliers
Don't be
afraid to shop around for new suppliers or to save money on other services
being performed for your business. This can and should be done at various
stages, including when purchasing or starting up a business, when setting
annual or monthly budgets, and during periodic business reviews.
Useful tips for better business
budgets
Adjust
accordingly. During these tough economic times, entrepreneurs may be seeking
ways to trim expenditures to increase cash flow. If your business expenses need
to be reduced, determine which items are nonessential to your business and cut
those items.
Consult
a professional. Consider consulting a trusted CPA, financial advisor or banker
to help you create a budget. A trusted professional can help get you started on
a budgeting system that will work best for your individual needs.
Contact
us
If
you have further queries, please contact Tannet
24
hours Malaysia hotline：603-21418908;
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hours Hong Kong hotline：852-27837818;
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hours Hong Kong hotline：86-755-
36990589;
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