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WHY CREATE A BUDGET FOR YOUR BUSINESS?

  • By Lauri Paxton
  • 18 Mar, 2016
Does the thought of creating a budget for your small business make you cringe? Many business owners feel that it is a difficult process to create a budget, but it is necessary to be able to make informed decisions and to steer your company onto a strong financial path.
Many companies use a product called Xero or QuickBooks to keep track of their financials. If this is a product that you use, making a budget may be a lot easier than you imagined!
The first step in creating a budget is having organized accounting records. If your records are a mess, then it can be very difficult. If this task is overwhelming, work with a bookkeeper to get your online chart of accounts set up accurately to begin with. Now is the time to clean up those records and start moving forward.
There are some easy steps to keep in mind as you create your budget.
  1. Don’t focus on making your budget 100% accurate and let that perfect number stop you from moving forward.As your company grows and changes throughout the year it is ok to grow and adjust your budget as needed. The more you work with your budget, the easier it becomes to create next year’s budget and plan for growth.
  2. Products and services such as Xero and QuickBooks can be a huge help in creating a budget.Many have an option to create a budget based on the previous year’s profit and loss. Online reporting keeps you in tune with your profit margins, accounts payable and receivables. The online versions of software also allow your bookkeeper to work virtually saving time and money.
  3. If you are not utilizing some type of accounting software,it becomes more difficult to review your financials to help you to find the base in which to begin the budget process.
  4. Keep revisiting your numbers as the year goes on!
Look at your budget as a measurement tool. Regular review of your budget allows you to adjust for variances and provides the opportunity to fix a problem before significant losses are realized. Set a budget, track your expenses and review the return on investment regarding the various marketing initiatives. This helps business owners set a strong foundation for success.
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