Regardless of whether your business employs one person or a thousand, one of the most important—and most overlooked—aspects of running a successful business is budgeting correctly. Most of us are becoming experts at budgeting for our families, maybe even helping extended family members and/or friends to set up their own budgets (do not forget to mention God’s Money Management’s 30-day course!). However, the budget you establish for your business affects more than just your pay-cheque…it affects whether you will even have a business in a few years.
Start the process by sitting down (with your business partner or anyone else who has a big say in the running of the business) and utilising tools for developing your budget, such as by gathering your bills, bank statements, pay slips, savings statements, copies of other expenses, receipts, and so on, just like you would for your personal finances. It is easy to input the expenditures into a software program such as Xero or Moneysoft to keep track of spending and paying bills, but some people prefer a spreadsheet format, and for a business, a spreadsheet format or Quickbooks option may be the better choice. Keep in mind that the program does not do the work for you; it only organises the work and simplifies the process. Whatever method you choose, be prepared for a shock when you begin to realise where the money has been going.
Why is it so Important? There are several reasons that budgeting is so important for a business, but we will just go over some of the top-rated ones in this article. Keep in mind that your ranking may be different in your business, depending on your needs and the size of the business.
Where does the business’ money go? This is extremely important, because if you do not know where your money is going, the business can fail – many do. No doubt about it—it is THAT important. For instance, the budget helps you understand everything from the average utility and rent expenses to how much your employees are costing you in photocopying. The largest businesses often have finance experts (such as accountants, bookkeepers or financial controllers) to figure this out, but small business owners are usually jacks-of-all-trades, so this is important to learn from the earliest stages of opening the business. Know where each dollar goes, and if it does not make sense to spend it, find a way to stop the leak before it grows into a flood.As you can see, the budget is one of the most invaluable tools when it comes to a business of any size and its respective success. Without a budget, you might as well take down your shingle and pack it up, because the chance for financial freedom through your small business is nearly nonexistent. You have to manage your business accounts just as you do when considering your family’s finances, with even greater diligence!
“A house is built by wisdom and becomes strong through good sense. Through knowledge, its rooms are filled with all sorts of precious riches and valuables.” --Proverbs 24:3-4