When was the last time you took a close look at your business finances?
The beginning of the year is an ideal time to create a budget, as it provides a fresh beginning and a clear view of your financial goals for the upcoming months. Your business’s budget should be tailored to your needs, financial goals, and overall business objectives.
Here are five steps to help you set your budget and stick to it.
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5 Steps To Set Your Budget
These 5 simple steps below will help you develop a budget that sets you up to achieve your business goals and financial ambitions.
Be patient, review your budget regularly, and remember what matters most. With a budget in place, you’ll be able to make confident decisions about your money and create the business you want.
Step 1 – Identify Your Revenue
Before you can start to set your budget, it’s essential to identify your sources of income.
As a business owner, you likely have profits from sales and other sources such as investments. Ensure all these are accounted for and add up the total amount. Knowing how much money is coming in and when it’s coming in is critical to creating a successful budget that works with your cash flow.
Step 2 – Allocate Your Expenses
Once you know your income, it’s time to allocate expenses into categories.
Include fixed costs and variable costs. Fixed costs are things like rent, and variable costs are things like payroll. Be sure to account for the full range of expenses to understand where your money is going.
Step 3 – Set Your Financial Goals
Now that you know your income and expenses, set your financial goals.
These could be short-term goals like saving for a vacation or long-term ones like buying a house or retirement savings. Clear goals motivate you to mind your budget and make wise spending decisions.
Step 4 – Create Your Budget
Using the data you’ve gathered, create your budget.
Deduct your total expenses from your income. If you have money left over, plan on saving it. If you’re negative, look for areas where you can cut back. Remember, a budget isn’t meant to be restrictive – it’s a tool to ensure you’re living within your means and reaching your financial goals.
Step 5 – Monitor Your Spending
The final step is to monitor your spending and stay on track.
Keep a close eye on your bank statements and credit card bills to ensure you’re not overspending in certain categories. Take a moment to reflect on any current projects and if there are things you are doing differently that could impact how much you are spending.
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Every business owner wants their income to feel secure and stable. Unfortunately, it doesn’t always happen right away. Many entrepreneurs and small businesses hit income plateaus, but there are ways to push beyond them. One stream of new income might not add up to much, but if you set up more than one income stream, it can become a river of revenue.
For more information download the checklist 12 Ways Make More Money In Your Business. Any additional income can give your business stability and growth when you reinvest it in advertising and other items that you really need in order to expand your business.