Business Growth: budgeting

Growing your business can be a big learning experience in many ways. One of the biggest learning curves in the early days of business is how to best budget your limited financial resources in your business. Often this budgeting of your financial resources will mirror how you may budget your personal finances, a limited supply of money to spread around a fairly set range of expenses.

While a business and a personal budget do have many similarities, there are some rather special considerations that you need to make when considering the budget of your business. The first of the differences is often scale, and the much larger differences that can occur from month to month, if not week to week, which means more frequent involvement in managing the budget. The other interesting part of the budget is the cash flow. which is a key part of the budget you need to stay aware of, in as much as money in and money out can happen at greatly varying times.

There are four main area’s of the budget that you will need to look at and work with. These are Bills, Variable Bills, Purchase of Goods for Sale and Customer and Supplier Accounts

BILLS

For the most part bills are something that is easy to budget, as often the amounts that the bills are for does not change by a large degree. Things like leases, phone, internet, and such are often mostly fixed bills with little variance. Budgeting for these is easy.

VARIABLE BILLS

There are some bills that are a little more difficult to budget, things like merchant fees, for EFTPOS, as these can change greatly depending on what your sales are.Really the best way to attempt to budget for these type of expenses is to take an average from previous bills and calculate the average into your budget. This means that sometimes you will be a little over while others you will have budgeted to much. However over a period of a year you should come in pretty close.

Variable bills are the biggest problem for trying to stick to a good plan for managing your budget within your business.

PURCHASE OF GOODS FOR SALE

Knowing just how much you are going to be spending on stock in advance is something that is more a lot of guess work then any type of known figure. Again like the variable bills the best idea here is to just attempt to maintain an average of previous months. This will at least give you a basic starting point, however is not always the ideal way for most often your largest single line in your Profit and loss statement.

One of the best solutions to avoid surprises for the purchase of stock is to get onto an account basis with your supplier as soon as possible. So that even if you do spend over budget you are not going to be surprised from a cash on hand point of view you will have time to get the cash in from sales to cover the cost.

CUSTOMER AND SUPPLIER ACCOUNTS

One of the worst things that you can do for you cash flow in regards to your budget is to offer accounts to your customers. The primary reason for this is that no matter how well you may budget for everything else, at the end of the day giving an account to a customer is something that you can never budget for, being paid on time. While the far majority of customers may either pay early or on time. There are also the customers that will pay eventually or never, both of which is bad for your business and seems to make it that much harder.

IN CONCLUSION

Keeping a budget for your business, even with some area’s that are far from easy to estimate, is something that may be essential to if not know exactly where you are at, to at least give you some guidance and a knowledge that you are not just randomly moving wherever the wind may blow you.

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