The Lucrative Rewards of Business Budgeting
Monday, June 8, 2020, 6:00 AM | Leave Comment
Spending less than you earn may sound like a basic concept, but it’s the secret to financial success.
Budgets are essential for managing personal spending, even for your business. If you don’t get into the habit of knowing where your hard-earned money and the money of your company is going, you’re likely in for a big surprise sooner or later.
It’s much easier to avoid falling into debt than it is getting out of it. Many entrepreneurs may prefer to hire someone to balance spending and income, but it’s not necessary if you are willing to learn to budget.
A detailed business budget that tracks income and expenses can save entrepreneurs and small business owners both money and stress. It will also help you anticipate your company’s cash flow needs when payroll taxes are due or to get your business through slower sales periods.
If you haven’t set up a spending plan for your company, there’s no better time than now, and if you have a budget already, don’t rest on your laurels.
Review it regularly to find new ways to lower your expenditures and save some money.
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Use Budget Software or Apps
Entrepreneurs have enough on their plate to worry about small details like tallying receipts or reconciling credit card transactions. An expense-tracking app can simplify the process for you. Depending on how far along you are in your new business, you may be able to use one of several personal budgeting apps.
Many personal budgeting apps are free but still have plenty of features to help track your business spending. They can sync with your bank accounts and credit cards to keep you up to date on your company spending. You can set spending limits and goals and review daily or weekly reports to track your progress.
As your business grows and becomes more complex, you can upgrade to business accounting and finance software. Freshbooks, Quickbooks, and Wave are some of the most popular. They’ll allow you to manage your taxes, payroll, and invoicing. Wave has a receipt scanner, so you can take screenshots of your receipts and let the app or software categorize the receipt into the right spending category.
Budgeting software can help you with your business spending by automating most of the process and reminding you of how well your business is meeting its goals. A good budget app will also help you target the areas where your business is overspending so you can do something about it.
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Schedule Time Towards Saving Money
Once you have a budget in place, tracking your spending and adjusting it should be a regular task.
Consider scheduling your spending analysis into time frames:
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Monthly
Review your spending for patterns and adjust accordingly. For example, you may find that your monthly spending on business meals is rising. Recognizing the pattern may allow you to cut back your spending by scheduling more coffee or lunch meetings and reducing the pricier business client dinners.
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Quarterly or Semi-Annually
Review your business expenses and speak with suppliers and providers about what discounts, promotions, or other offers are available to save.
Some examples include the following:
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Ask your utilities or internet provider for an audit of your usage and spending. They may find new plans to reduce your bill or ways to save money.
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Reach out to vendors and suppliers to ask about any upcoming promotions or discounts that could save you money on future orders.
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If you’re a retailer, look at your best-selling items and ask the vendor for a discount on your most frequently ordered items.
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Year-End
The end of the year or fourth-quarter is the best time to go through your annual income and expense reports to see the state of your business and how it’s doing. It’s an ideal time to plan for the future and to make long-term changes to your company’s bottom line.
For example, you may have made more income than projected and have funds available for larger expenditures. You may want to use the funds to invest in clean energy or to make your business operations greener. Turning to green energy or investing in a fleet of hybrid vehicles will cost you less in utility and gasoline bills in the long run.
Buying a hybrid vehicle reduces your company’s carbon footprint which could be an excellent public relations move. Besides helping your company become more environmentally conscious, a hybrid vehicle could also save you considerable money at the fuel pump.
In addition, you can take advantage of tax credits. For example, investing in green-energy across a number of options may qualify you for several energy-efficiency tax credits including the Alternative Motor Vehicle Credit and Business Energy Investment Tax Credit. Your company’s investment into green and alternative energy sources could have several benefits down the road.
Save the Savings
Growing your company’s cash reserves should be part of your budget goals. Add automatic savings as a line item on your business budget. Even if you only contribute a small amount each month, it could help you fund a shortfall. Grow your cash reserves faster by allocating the money you save on operating expenses to your savings account.
As an entrepreneur, you are likely more risk-averse than the average person. Following a company budget and contributing regularly to grow an emergency contingency fund can take some of the pressure off of how you run your business so you can focus on bigger-picture goals.
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