Whether your company is just starting or you've been in business for years, it's never too late to put a budget in place. Even a simple budget can help with tracking expenses so the company can be prepared when those bills come due.
If the company is in rapid expansion mode, a budget can help keep business goals in mind and give a framework to track results. Take, for example, Apex Facility Resources, a Seattle relocation and business furniture company. The business saw a 900 percent jump in sales, but the company's owners couldn't tell if it had actually made money. "We didn't have any kind of operating budget when we started growing," Apex owner Marlaine McCauley told Bloomberg Businessweek.
Think of a company budget as a business plan for finances. It can be as detailed or as bare bones as you want and is easily adaptable to change with the company's needs.
By using a simple spreadsheet program, your business can set up a basic budget plan that can give you a look at startup costs, funds needed for any labor and materials, day-to-day costs, revenue and expected profits.
Corporate tax accountant Charles Thieme III recommends that businesses should, at a minimum, track the following three categories: income, expenses and recurring bills.
Any money the business makes would be considered income. This is the category where you can set and track sales goals as well as other financial milestones.
When you initially put together your business plan, you likely did a market analysis which allowed you to see the need for your product or service. Use that market analysis as a basis for setting sales goals.
Expenses are the costs of doing business. Items that fall into this category include payroll, recurring bills and one-time costs. To have a balanced budget, income must equal or be greater than your company's expenses.
Any expenses paid on regular basis, either monthly or annually, like utilities, office rent, supplies and payroll can be considered recurring bills. It's possible to estimate what these bills are by taking an average cost of separate items and estimate what you expect to pay for each.
Let's use the electric bill as an example. If your business uses electricity for heating and cooling, you know the electric bill will be higher in the hotter summer months and the colder winter months. Use previous electric bills to establish an average for that cost.
As for other recurring costs like paper supplies and other maintenance costs, an average of the previous three months should be sufficient to be able to project a cost.
"I would suggest totaling up the previous three months and divide by three," Thieme said. "If you know how many of a particular item you will use monthly in the future and know the expected price, you can calculate."
Tracking the Budget
Financial management software and even basic spreadsheet software can be used to keep an eye on your business's budget. The programs are still only as good as long as the data in them are consistently updated. A business budget that hasn't been updated in a year is not very useful in making projections for next year, unless it's updated.
Many banks and financial institutions offer online banking that can track spending and send e-mail alerts if something is amiss. Talk to your bank to see if there's a way to alert you if the money in the accounts get below a certain level.
How do you budget your financials? Leave your tips in the comments box below.
Linda Doell is an award-winning journalist with more than more than 20 years' experience as a reporter, editor and blogger. Linda blogs via Contently.com.
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