It’s pretty enlightening. While working 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. In addition to that, 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, though nothing seemed to fit perfectly. So, I borrowed from different ideas and came up with a plan that turned my business around.
My new budget gave me to room to afford the things I needed to grow, while simultaneously earning more profit and working fewer hours each month.
A business budget will make room so you can afford the things you need to grow.
I know that many people experience the same challenges. In an effort to help others, I’m sharing my 5-step plan to creating a balanced business budget:
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.
Fixed costs are expenses that are charged the same price each month. As you can imagine, incorporating these is by far the easiest part of creating your business budget.
Review your past bank statements or FreshBooks reports. You’ll easily be able to spot your fixed bills and the total amount they cost you each month.
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 to grow faster.
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.
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 grow.
What else stands in your way of a balanced business budget? Are there any hurdles we’ve missed that currently have you paralyzed in the process? If so, comment below with your questions, challenges or concerns.
This is from the FreshBooks archive and was originally published in March 2016.