20.9.2020

2min Read

Entrepreneurship

3 Budgeting Tips for Entrepreneurs

By: Norman Mba

Before you can make money, you have to figure out how to spend it; it's a basic rule of business. Creating a budge may be one of the last things you want to do, but the inability to plan finances means that you are unknowingly leading a project to death. You must know where you stand in terms of income budgets you need to reach and the expense budgets you must adhere to for your business to be profitable. You need to know that you're going to have enough cash flow, even during challenging months. 

 

Here are three tips for building a better business budget:

 

Be Realistic

You should plan your budget based on previous results and future projections. If possible, try to analyze financial results or industry trends from up to five years ago as a starting point. Ensure that you take the time to review profit goals. Business owners who are too optimistic while planning increase the chances of predicting expenses that are too low, or projecting revenue too high.

Limit your fixed expenses in the beginning.

Your fixed costs are usually relatively constant throughout the year, as the name suggests. Elements such as wages and insurance need to be a priority consideration. During the beginning stages of a startup, keeping your expenses as low as possible is key to longevity. Ensure that you consider the need to plan for future years. Economic downturns are inevitable, so you should not only try to create a balanced budget, but you should also start building up a cushion for the anticipated rainy days.

Utilize the Right Tools

All businesses need to monitor their finances, but startups, in particular, need to be careful in monitoring results to ensure that everything is on track. So if you're frustrated with your Excel budget, it may be time for a change. Ideally, you can conduct a thorough review of where you stand per month and year to date in terms of income and expenditure.

Neat is an excellent accounting software that can help manage business transactions and reconcile your books.

 

Budgeting is a vital way to help you turn your business plans into reality. It's all about being ready, knowing what to plan for, sticking to the strategy.

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