Why You Need a Budget For Your Small Business
You probably already know that a good budget is an important tool for your small business. But running the business and taking care of your customers doesn’t leave you much time for an in-depth look at your finances. And anxiety about a closer review of your financial situation can cause you to put off creating a budget – leaving you without a powerful tool for planning, tracking results, and monitoring important trends. Here are some tips for creating a basic budget.
- Agree that you need one.
You might think that you don’t need to take the time to establish a budget, since you keep basic income and expense information in a spreadsheet – or worse, in your head. But business owners who handle finances this way are prone to unconsciously “adjusting” the numbers to appear more positive or may not remember things accurately. Establishing a formal budget requires you to commit to accurate numbers. And when you maintain a budget over several years, you gain a historical perspective that can help drive your strategic decisions.A cloud-based accounting solution like Sage Intacct makes it easy to access accurate, real-time data and streamlines the budgeting process, so that it’s less daunting to create a realistic budget.
- Find the right budgeting tool.
You might think that your business is too small to take advantage of budgeting tools. But solutions are available to businesses of all sizes. And if you use accounting software, you may already have access to the tools you need. Better yet, a cloud-based budgeting solution eliminates the need to manage multiple spreadsheets and gives you real-time access to data, automatic software updates, and the ability to easily share current budget versions with key stakeholders.
- Gather information.
Whatever tool you choose, you’ll need to compile the raw data you need to create your budget. The best place to start is last year’s data, if you have it. Go back as far as you can and look at the information for a variety of time frames, including weekly, monthly, quarterly, and annually. The majority of your financial information will fall into either the revenue or the expense category. Provide as much detail as possible for both categories, and be sure to include irregular sources of revenue and expenses that are frequently overlooked, such as bank fees and interest income.
- Review and update regularly.
It’s important to remember that your budget is a living tool that you should revisit throughout the year – not something to be completed, filed away, and not looked at again. Used properly, a strong budget can help you make smarter business decisions throughout the year. If you don’t update it, your budget won’t accurately reflect the financial condition of your business. Be sure to take the time at least monthly to replace estimates with actual numbers, make adjustments, and review the validity of your projections.
- Use your budget to make better decisions.
A good budget can help you make more strategic, data-driven business decisions. It serves as a way to identify trends and address potential problems or opportunities. Regular review and evaluation can help you spot divergences from estimates, anomalies in cash flow, and increases in revenue that can be used to grow your business.
At MicroAccounting, we are passionate about supporting small businesses. We would love the opportunity to talk with you about Sage Intacct and how it can help you create a budget to drive your success. Call us today at 855-876-3773 or email us at [email protected] to find out more.