Small Business Budgeting
Do you have a small business? Or planning to start one? Definitely you need to know small business budgeting. A budget can help you manage your business. Just as family units live on a budget, a business must also have a budget. You just can’t live without it.
An annual budget serves as a guide and a goal for you as an entrepreneur. With a budget, a business owner can determine where the month-to-month performance is headed. Generally, most small business budgets cover the period of the fiscal year from January to December.
At the end of each month, the forecast budget is compared with the performance of the business’ operations. This line-by-line comparison of figures is called variance analysis.
In variance analysis, you as the business owner and entrepreneur should know why there are differences between budget and actual results for each line item. For example, why was sales forecasted at Php 900,000 when the actual results show that the total sales was only at Php 750,000 for the current month? Why are electricity expenses lower than budgeted? There should be a logical reason for any differences between the actual and forecasted budget whether it is below or above budget. And you as the business owner should find it out. Implement those findings that you find beneficial to your business to meet your budget and take action on those findings that needs to be eliminated.
After the variance analysis, you may determine if you need to adjust your forecast for the remaining months, based on current knowledge and information. The very goal for small businesses is to have an achievable budget rather than one that is impossible to attain.
A budget is only as good as the assumptions you make, and if present conditions warrant a change in assumptions, then the budget should be revised. A budget is never a constraint in managing your business well. It is only a tool. Do not be constricted by it.
To get articles, you can subscribe using your favorite RSS feed reader or have them delivered directly to your email address.
What To Read Next
Tagged with: Business
Filed under: Entrepreneurship
Like this post? Subscribe to my RSS feed and get loads more!
2 comments
i guess it would be easy to start with the budget for fixed expenses and then determine the break even point of your small business. a lot of sacrifices has to be made at the start.
[Reply]
you have hit the jackpot when stating that in business budget is only a tool and not use as a restriction to go forward…in business many moving parts are to be considered…we are lucky now that excel has already been invented to assist us entrepreneur wanna be’s…just imagine those time’s when one must make long list on all the gains and expenses to balance everything…i guess budgeting is very much needed to keep the business on track and to know if its practical to keep on going forward…but its in human’s intellectual ability on how to solve problem…and if the budget is the problem then definitely there lays a deeper problem on the business…nice posting
[Reply]