Tuesday March 13th, 2018
Creating a budget for your growing company can seem like an insurmountable obstacle, but it is certainly one you cannot avoid. Your business budget should be custom tailored to suit your specific needs, and to provide the necessary tools for your team to do their jobs effectively and efficiently.
Ideally, you should create a budget at the start of your company, but if you’ve been functioning without one for some time, it’s important to get your HR department on the task. Sit down with your management staff and review the company’s previous spending habits to look for areas that may need some fine-tuning. Once you’ve gotten a good overview of the company’s current income vs. expense situation, you can map out a clear plan to move forward.
Sources of Income
The first step in creating a budget for your company is to make note of all your sources of income so you know what is available to allocate to your expenses. When tallying your income, be sure to include:
Be sure to comb through your business banking statements, as well as any open contracts to ensure that you have complete information before moving on to the second step of creating your budget. Separate your income into one-time payments and recurring payments if applicable, or if your company is product-based, use the estimates based on past performance.
Step two of creating your budget is all about your fixed costs, or regular expenses. You’ll catalogue variable expenses later, but for now focus on the expenses that are recurring monthly or annually. This should include:
Again, it’s important to use your banking statements, or any payments apps you might use, as a reference when cataloging your expenses, as it may be easy to let a few slip through the cracks if you’re set up for automatic payments.
This is where it might get a little more complicated, and why it is so important to track all of your expenditures, big or small. Variable expenses include:
The trouble with this category is that it can include literally anything that you’ve purchased for your business, but that isn’t a regular purchase. So, you’ll need to be extra careful when reviewing your statements to ensure you allot enough money in your budget for this category.
Large One-Time Purchases
Large one-time purchases are the items that have the most potential to sneak up on you and wreak havoc on your carefully planned budget. So, it is important to plan ahead for them and set aside money to cover those unexpected purchases. They could include:
This is another category that has endless possibilities, and is dependent on the industry you work in, but it is crucial to the success of your company to make sure unexpected purchases don’t sink you financially. If you are able to, create a separate fund for large purchases that is untouched by other expenditures and is only available for those unforeseen circumstances where you either need to replace old equipment, furnish a new office, purchase a company vehicle, etc.
Creating a detailed budget that plans ahead for any of the possibilities you may face as a company leader will allow you to make smart financial decisions that will lead your team to success and encourage consistent growth.