Have you ever evaluated where every dollar of your budget goes?
It’s pretty enlightening. While working as a freelance blogger,
I decided to finally make the time to take a close look at my expenses.
To my great horror, I discovered that most of the earnings left
over after paying my basic personal and business expenses were being foolishly
spent. In addition to that, my monthly income was never increasing, though the
work on my plate certainly was.
After some research, I decided the answer was a business budget.
I found lots of online resources but as a freelancer, though
nothing seemed to fit perfectly. So, I borrowed from different ideas and came
up with a plan that turned my business around.
My new budget gave me to room to afford the things I needed to
grow, while simultaneously earning more profit and working fewer hours each
month.
A business budget will make room so you can
afford the things you need to grow.
I know that many people experience the same challenges. In an
effort to help others, I’m sharing my 5-step plan to creating a balanced
business budget:
Step 1: Tally Your Income Sources
The first element of a good business budget is figuring out how
much money you bring in on a monthly basis.
Start with your sales
figures first (which you can easily get using the Profit & Loss report in
FreshBooks), and then go further by adding other income sources you use to
run your business.
Step 2: Determine Fixed Costs
Fixed costs are expenses that are charged the same price each
month. As you can imagine, incorporating these is by far the easiest part of
creating your business budget.
Review your past bank statements or FreshBooks reports. You’ll
easily be able to spot your fixed bills and the total amount they cost you each
month.
Step 3: Include Variable Expenses
Items that don’t have a fixed price tag each month are called
variable costs.
Many of these purchases can actually be scaled up or down
depending on the state of your business, using your monthly profit. Your profit
each month will be determined by the earnings you’re left with after paying all
your costs.
So, if your business does better than you forecasted, you can
use the extra funds to increase variable spending enabling you to grow faster.
Step 4: Predict One-Time Spends
A great perk of creating a budget is now you will be able to
factor in one-time purchases better than ever before. While some of these items
may come up unexpectedly, like the purchase of a laptop to replace the one that
crashed, others can be budgeted for months in advance, like that business
retreat you’ve been eyeing, to protect your business from financial burden.
Step 5: Pull It All Together
The first four steps of this post detail the elements of a good
business budget, so the last step is simply pulling it all together. Take
action by using this handy checklist with specific examples so you can create
your budget without any hassle:
INCOME SOURCES:
·
Hourly Earnings
·
Product Sales
·
Investment Income
·
Loans
·
Savings
·
Other
FIXED COSTS:
·
Rent/Mortgage
·
Utilities
·
Salaries
·
Internet
·
Government and bank fees
·
Cell phone
·
Website hosting
·
Legal Services
·
Insurance
VARIABLE EXPENSES:
·
Raw Materials
·
Contractor Wages
·
Commissions
·
Advertising
·
Other Marketing Costs
·
Transportation
·
Travel & events
·
Printing Services
ONE-TIME SPENDS:
·
Computer
·
Furniture
·
Software
·
Office Supplies
·
Gifts
Creating a monthly business budget may seem like a hassle, but I
bet it’s something you’ve been thinking about for a long time. Take the leap!
It’s an essential infrastructure project that gives you the ability to make
conscientious financial decisions so your business can stay on track and grow.
What else stands in your way of a balanced business budget? Are
there any hurdles we’ve missed that currently have you paralyzed in the
process? If so, comment below with your questions, challenges or concerns.
This is from the FreshBooks
archive and was originally published in March 2016.