September 6th, 2022
Budget… This is not a word we like to hear! While budgets are no fun, they are crucial to not only business, but personal finances, as well. Budgets, put simply, are just planning, but a more “official” definition is that budgets are an estimate of income and expenditures in a set period of time, allocating what and where money should be spent.
What is a Budget
A budget is an outline, or starting point, to ensure that you are not overspending and running out of funds. To help get you prepared, we have compiled a list of 8 easy and successful tips for your budgeting needs.
- Use REAL numbers in your budget. Review your past income and expenses and use this as a starting point. You will be able to see what you have been spending your money on and you can make adjustments as you see fit.
- Acknowledge the seasons, meaning that you will not have the same sales numbers every month. If you are providing landscaping services, your numbers will be much higher April-October. If you are selling children’s toys, your sales will significantly increase October-December. Use this information to scale your money from busy months to slower months while budgeting.
- Identify your Essential categories. It is important to note the difference in what is “essential” for your business to operate. For example, rent, utilities, software fees, etc. would be considered essential and your business would be unable to function without these expenses. Other expenses, such as marketing, are very important to a business, but not deemed “essential”. You must ensure that your essential items are covered monthly before expanding your resources to other un-essential items.
- Share the responsibility by involving your employees. Your staff is also very knowledgeable about what is important in your business operations. By involving them in the process, they may be able to point out some things that you were unaware of or didn’t think of. It gives them peace knowing that you are not keeping secrets and they will feel confident that they play a role in your decision-making.
- Leave room in your budget. There are always going to be unexpected expenses in doing business, so make sure that you are also putting money to the side for emergency situations. By doing this, you can also prevent “borrowing” from one budget to pay for something else in another category. You can label it as a miscellaneous category, and it will keep you from pinching pennies and budgeting down to the last ink pen.
- Debt…most businesses have debts in some shape or fashion. It is important to pay these off as soon as possible. Debts cost money, such as financing charges, interest, etc. Once debts are paid off, you can start to use that money for some non-essential items.
- Continue to review your budget. Look at each area and see if you can make improvements by switching software or vendors. As your company grows, or even just changes season, your budget will change and require constant maintenance. It is important to stick to your budget to ensure that you are not over-spending, but also know that the budget can be adjusted.
QuickBooks has a tool for this. See below for how to use it.
Once logged in, click on the gear button in the top right-hand corner. Under Tools, select Budgeting. Select Add Budget. You can then name your budget and select what year you would like your budget to be for.
You can select the interval (monthly, quarterly, yearly), whether you want to pre-fill data (from your existing QB info), and whether you want to sub-divide it by customer. Click on Next in the bottom right-hand corner. You can now input your numbers, or pre-fill your data from QB. Don’t forget to Save your budget when you are done. You can come back and make changes at any time.
There are two reports that you can now run from Quick Books to analyze your budget: Budget Overview and Budget vs. Actual. It is important to see where you are at on your budget to ensure you don’t go over budget. From there, you can adjust your budget, as needed.
8. Remember…time is money! Your customers are not only paying for your goods or services, but they are also paying for your knowledge. Your employees are also being paid for their time. Payroll would be considered another “essential” category. Don’t sell yourself short and know your worth, but also make sure to account for payroll expenses in your budget. Don’t underestimate your time, as this can cause an adverse effect on your efficiency and utilization. Don’t rush yourself or your employees. Set a timeline that is adequate and follow that timeline! This doesn’t mean that you must drag things out, but we all know a few extra hours or an extra day for finalizing never hurt anyone.
If you need help with your bookkeeping and accounting, don’t hesitate to schedule a consultation with us!
Even though we are based in Albany, NY, we offer our expertise in business accounting, bookkeeping, and tax preparation all across the United States.