Planning For Success In Your Business
Do you feel like running from the room screaming when someone says, “Where’s your budget?” Or what about “How much did you budget for that?”
Most people hate the idea of a budget. These are the people who have never had one. They feel that a budget is too confining and that it’s something to avoid. Well, if that’s you and you want to succeed in business – get over it! A budget actually puts you in control of the money you work so hard for and of your financial future.
First, adjust your thinking. Instead of seeing a budget as a restriction as to what you can do, see it as a tool for helping you plan to do as much or even more than you thought possible before. It’s important to remember that a monthly budget isn’t a hard and fast system that you have to follow rigidly. Many people avoid creating a budget because they feel it is too restrictive. The truth is that a budget is liberating. It’s a plan that grows and adapts with you as your needs change.
When it comes to business, your monthly business budget forms the foundation of all of your business finances. Keeping a monthly budget make it easier to plan; stay out of debt; contract with the right people and services; make solid business decisions; and best of all, get and stay profitable.
There are a few simple steps to create your monthly budget plan.
Step 1: Choose The Planning Tool Right For You
Do you prefer to simply sit down with pen and paper? Check your local office supply store for simple accounting notebooks.
Prefer using a computer? Use a word processing or spreadsheet application. I always prefer Excel when it comes to numbers as it is much easier to automate calculations in Excel than in Word tables.
Think you’d prefer to use a small business accounting program, but don’t have the cash to invest at the moment? Do a quick Google search for “best free small business accounting software” to find one. Most programs have a budgeting feature.
Step 2: Determine Your Income Sources
Income is generally the first category for any accounting system. Think outside the box for a moment and think of all the ways you can make money. For instance, if you are working in information marketing you might have sales, commissions, affiliate marketing, etc. If you are still uncertain of all the ways you make money, take a look at the monthly statement from your bank or payment processor (such as PayPal). Look at where your money comes from and categorize it.
Put your income sources in a table of some kind. Make it five columns wide. The first column contains your income sources. Column 2 is what you actually made; name it “Actual.” Title column 3, “Budgeted.” In this column put in how much you thought you’d make that month. The budgeted column is what you use when determining your expense budget. More on that later…
Your fourth and fifth column are “Over Budget” and “Under Budget.” As you might guess Over Budget is how much you earn over what you budgeted and budgeted to earn and Under Budget is for how much under your budged income you came. Obviously, you’ll only fill in one of these two columns for each income category each month.
Step 3: List Your Monthly Expenses
Since some things you need to put into your monthly expenses come only once a year, you’ll need to think in terms of all expenses. For example, you may only pay for your website hosting once a year, but you need to account for it some way. Take the total of any item you pay for only once a year and divide by 12 to come up with your monthly expense for that item.
Reviewing your bank statements can help you figure out your regular expenses. If you’re just getting started in business and aren’t sure, make some guesses. Remember, it’s always better to overestimate your expenses than to underestimate them.
Make another 5-column table. In the first column list your expenses by category and sub-category. For example, under the category Sales Expenses, you might have sub-categories of Affiliate Commissions, Advertising, and Shipping & Delivery. Under each category put the total for that category and save space for “Percent of Total.” You’ll figure out the percent of total later.
Now about that percent of total space…
This is useful planning data. Looking at these percentages you can easily see where you might be overspending by category. This helps you to know where to adjust your expenses when needed.
Just like with income the Actual, Budgeted, Over Budget, and Under Budget columns.
Step 3: Take Time For Your Monthly Summary
Once you have this all set up, set a time on your schedule at the end of each month to review all of the information to see how well you anticipated and planned. This information will help you create the next month’s budget.
The basic formula you are working with is Income – Expenses = Profit. So, at the end of the month put a line at the top or bottom of your summary have another table that shows those figures along with the columns for actual, budgeted, over budget and under budget. Now a quick glance tells you how you did that month.
Step 4: Put Your Monthly Budgeting Plan into Action
Like with any plan, it is only good if you use it. To put your Monthly Budget Plan to use you’ll need to create a system to keep your income and expenses organized. Decide whether you are going to add up your income and expenses daily or weekly and then stick with that plan. Whether daily or weekly, enter it as an appointment with yourself in your calendar.
You’ll need to keep track of all invoices and receipts. Here’s one way to do it. Staple the day’s or week’s expense receipts to one piece of paper with the total written. Take a second sheet of paper and do the same with the invoices. That way, when you sit down at the end of the month to review your budget and plan for the next month, you’ll have all of the information readily available.
The first few months you may be off by quite a bit. However, as you learn to predict and anticipate income and expenses your budget will gain accuracy. Once you see just where your money is coming from and where it is going over time, you can make adjustments to it to meet your business needs.