One aspect of running a successful business is the implementation of a comprehensive financial management system. As a business owner, you need to know how much you are making (revenue) and how much money you are spending (expenses). With the implementation of this system, you will be able to ascertain whether you have made a profit or loss.
One of the most beneficial tools you can install into a business’ financial system is a budget. It is simply a tool which one uses to allocate money for various purposes.
An advantage of developing a budget is possessing the ability to track one’s own spending on a regular basis. This will prevent you, the business owner from overspending and losing sight of where your money is flowing.
I know what you are thinking. You’re thinking it sounds like an excellent tool to introduce into your company, but you may not know or have access to steps to creating one.
The following are Five Simple Steps you can use to create a budget for your company:
Step 1: Divide your budget into the following categories we suggest:
- Business Expenses
Step 2: Assign subcategories to the categories of your budget. List these subcategories below each category.
- Donation – Charities, Schools
- Investments – Term deposits, Stocks
- Insurance – Life, Healthy, Pension
- Savings – Emergency Fund, Reserves
- Business Expenses – Rent, Utilities, Loan Payments, Salaries, Office Supplies
Step 3: Create a column “Budgeted Amount” next to the subcategories you would have created and assign a monetary value to them. This would be the amount of money you plan to spend in a particular subcategory.
Step 4: Create a column “Actual Amount” next to the “Budgeted Amount” column. This would be the amount of money you spent in a particular subcategory.
Step 5: Create a column “Available Amount” next to the “Actual Amount” column. This would be the difference between the “Budgeted Amount” and “Actual Amount”; the remaining amount of money available for use.
You see, budgeting is a very simple process. It’s not rocket science at all! All it requires is the discipline to follow through with your spending plan.
Whether you are a start up or established business, it is always a wise practice to implement a budget to enable smooth operations within your company.