When I worked 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, and 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, nothing seemed to fit perfectly. So I borrowed from different ideas and came up with a plan that turned my business around – allowing me to budget for the things I needed to grow, earn more profit each month, and eventually work less hours doing it. I know that many people experience the same challenges so today I’m sharing the 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
By far the easiest part of creating your business budget will be determining your fixed costs, because these expenses are priced the same each month and usually are essential to running your business. Look at your past bank statements and in your FreshBooks reports to figure out what your fixed bills are 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 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:
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 growing.