Running a successful small business is about more than having a great idea. It even transcends providing top-of-the-line products and excellent customer service. Running a successful business is about creating and adhering to a small business budget.
It might not sound like a big deal but having a budget for your business could mean the difference between a profitable year and running your business into the ground. Nearly 50 percent of all small businesses fail within the first five years, and typically, it’s because of mismanaged finances.
Know Your Expenses
Creating a small business budget means digging into the nitty-gritty of your costs. You need to know exactly how much money your business spends, where it’s going, and what category the expenses fall under. This data will also be important come tax season to help you save money.
Fixed expenses are your concurrent costs for operating your business each month that stay the same. For sample, these can include building costs (rent and insurance), services (internet, phone lines, etc.), leased furniture/equipment, and more.
Variable expenses are those that are likely to change month to month. These include costs that fluctuate with sales (materials, products, services, etc.). These costs, while to be expected, are never expected to be the same.
Semi-variable expenses are relatively similar each month but can fluctuate for multiple reasons. These can include commission checks, utilities, salaries, and more.
Finally, your small business budget needs to account for one-time purchases or expenses. This can include equipment, furniture, vehicles, and more.
Account for Your Earnings
As important as it is to know your costs, it’s equally important to know your revenue. You need to make sure you’re tracking every incoming dollar. You need to know how much money your business is bringing in every month, and where it’s coming from.
This will help you streamline your business by understanding what products, services, or departments are most profitable, and where you might be losing money.
Bring it All Together
Once you have a detailed layout of your costs and earnings, it’s time to bring it all together. Also known as cash flow, this assessment will help you understand your business’s revenue after expenses.
This data is also important to track each month to identify any positive or negative trends in your finances. The more aware you are, the more diligent you’ll be about improving your numbers.
Consider Hiring Help
Finally, it’s important to recognize that creating a small business budget can be complicated, especially if your business has a lot going on. As a Destin business owner, you might not have the time, ability, or inclination to manage your budget on your own.
In this case, we recommend hiring a professional bookkeeper and/or accountant to help carry the load. They may also be able to provide valuable insight into how to improve the day to day finances of your business.
Need More Help with Your Small Business Budget?
If you need help creating a small business budget, you’ve come to the right place. Take a look at our bookkeeping services if you need help with your monthly finances, budgeting, taxes, and more. If you have any questions or concerns, feel free to contact us today, and we’ll get back to you as soon as possible.