Planning a budget for your business is not an easy undertaking, mainly because of the many unknown factors you have to try to anticipate. To some extent you probably have a decent handle on recurring expenses, including a lease, payroll, and supplies, just for example. But nearly any cost can change depending on demand. If your sales increase from one month to the next you may need to pay for more materials, you might have to pay extra for rush shipping, and you could end up owing employees for overtime. Of course, the bigger problem is that you can’t predict how much money you’ll have coming in, and you may have to spend up front without any guarantee that you’ll make your money back. That said, you still need a working budget in place to help you plan, even if you end up adjusting it frequently to account for financial changes. Here are some benefits you’ll gain when you take the time to plan a business budget.
- Allocate current and anticipated funds. A budget is not only a good way to list out your current income and expenses in order to ensure that you’re not spending more money than you have coming in, but it can help you to allocate funds moving forward. Obviously you’ll have to pay operating expenses if you want to keep the doors to your business open. But if you consistently see additional funds coming in above and beyond what you seem to be spending, you can start to plan for upgrades, expansions, and more. Plans may change over time, depending on how close your earnings are to projections, but having a budget in place at least gives you a springboard for planning how you want to allocate funds.
- Monitor spending. Your budget is like a guide that helps you to understand where money needs to be spent on behalf of your business. But over time it can also help you to monitor where your money is coming and going. When you compare monthly totals to your planned budget you can see areas where your forecasting was off. This information can help you to determine changes in operations costs, track fluctuations in earnings, and even catch illegal activities like skimming.
- Control costs. Businesses neither earn nor spend the exact same amount of money from month to month and year to year. But tracking your income and expenditures can allow you to see averages, helping you to better plan for future earnings and expenses. In addition, you can use this data to trim costs where possible, improving efficiency, negotiating with vendors, and even increasing earnings as a result.
- Pinpoint overages. Wasteful spending occurs in nearly every business, but your budget can help you to see where you’ve gone off the rails with overages. Tracking your costs and comparing them to your budget is the key to ensuring that you catch wasteful spending and nip it in the bud. With targeted software from a provider like Mikrofax eProcurement Solutions, Inc. you should have the transparency and tracking capabilities you need to keep your budget accurate and cut costs.
- Provide goals for staff. Over time, you’ll control your business budget through trial, error, and tracking. And once you’ve got a handle on averages for money coming and going you can really start to plan for future projects. This allows you to get your staff on board, organizing and working together as a team to reach a common goal.