https://www.sikich.com

5 Basic Tips for Small Business Budgeting

Sikich

Aug 19 2016

2 min read

Creating and maintaining budgets can be challenging, as even the smallest, yet unexpected, event can make you and your business feel trapped in a financial maze. But workable budgets can help manage cash flow, keep you in line for meeting organizational goals and also help you maintain control of your business. Knowing where you plan to spend your money will ensure that the funds are going to the correct place at the correct time. Here are five tips that may help you create and abide by your budget:

Be realistic in projecting cash flows. Conservatism is key. While your business idea or plan may seem flawless, actual results may differ. Underestimating is better than overestimating, especially with budgeting, and it is always better to overachieve past a budget than to come up short.
List all essential business expenses. This includes expenses such as wages, taxes, rent and so forth. Make sure your list is broad and thorough. Expenses come at a business owner from every angle and are often unexpected if the budgeting process is rushed.
List non-essential expenses. When cash is tight, limit items such as furniture, groceries, advertising, etc. A realistic overview of business necessities is crucial to staying under budget with regard to expenses. Most often, the initial, quick purchase is not the cheapest. With a little thought, an expense could be reduced or eliminated entirely. Advertising is the perfect example. Alternatives to traditional advertising could be social networking, public speaking or other free/inexpensive methods.
Account for debt in the budget. Debt can be a dangerous funding tool. It can either jump start the business or be a significant hindrance in the expansion of a business in the form of interest payments. Be sure that you can meet interest payments each month. If not, penalties or additional interest is likely.
Keep some profits to cover surprise costs and maintain the budget. Starting with a break-even budget or a deficit is dangerous. Even if you are the sole owner and employee, keep some profits for the business and do not distribute them entirely. This way, if sales are below the budgeted amount, there will be a cushion on which to fall.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

About the Author

Sikich

Sikich is a global company specializing in technology-enabled professional services. With more than 1,900 employees, Sikich draws on a diverse portfolio of technology solutions to deliver transformative digital strategies and is comprised of one of the largest CPA firms in the United States. From corporations and not-for-profits to state and local governments and federal agencies, Sikich clients utilize a broad spectrum of services* and products to help them improve performance and achieve long-term, strategic goals. *Securities offered through Sikich Corporate Finance LLC, member FINRA/SIPC. Investment advisory services offered through Sikich Financial, an SEC Registered Investment Advisor. 