Considering transitioning your side hustle into a full-fledged small business? If so, your top priority should be establishing a solid business budget.
To ensure the sustainability of your business, adhere to these steps to effectively manage your income and expenses.
What is a Business Budget?
A business budget is a way to keep track of all your business expenses, revenues, and profits. Having a budget will help you know how much your business is making and what adjustments you need to make to keep your business running smoothly.
There are many different formats a business budget can take. One common form is an Excel sheet. For more advanced forms, you can use different platforms and apps. Some popular apps include Freshbooks, Pocketguard, and Xero.
Why Do You Need a Business Budget?
If you’re a small business owner, you might think it’s easier to organize and manage your business income with your regular income and expenses. However, keeping your business finances separate from a budget can help avoid confusion. Here are some other reasons to have a business budget:
- Having a business budget will help you keep track of your expenses so that you don’t run the risk of going out of business.
- Having a business budget will be helpful when it comes to your business taxes.
- It’s a great way to know how much money is coming in and going out of your business.
- It’s a simple way to separate your finances from your business expenses.
Six Steps to Creating a Business Budget
Creating a business budget can be simple. It involves calculating numbers and taking a deeper look at your business. However, once you take some time to set up your budget, you’ll find that your business runs smoother than before.
- Know Where Your Money Is Coming From: It’s exciting when your business starts making money, but do you know how much it makes monthly and yearly? If not, now is the time to figure out the answer to that question.
- Factor in Costs to Run Your Business: Here is the part where you’ll need to be very thorough and look at everything it costs you to run your business.
- Calculate Potential Profits or Loss: With your expenses and revenue all calculated, you will figure out your profit or loss.
- See Where You Can Make Adjustments to Your Budget: If you’re unhappy with your profit numbers, then it’s time to adjust our business budget.
- Set Up an Emergency Fund for Your Business: Once you get to a point where you’re making a reasonable profit, you want to start setting up an emergency fund that you can work into your business budget.
- Stick to Your Budget: The last and most crucial step is to stick to your budget. Once you’ve made adjustments and know the general costs of running your business, don’t buy things you don’t need to spend without thinking.
