Although the word “budget” strikes fear into the the hearts of most entrepreneurs, preparing an annual budget  should be one of your priorities  as a small business owner. Without a budget, you are essentially “flying blind” and have no compass with which to navigate your operations and performance. In fact, without a budget, you may not know how much revenue you need to reach your goals, how to plan for staffing, or how much reserve funding you have on hand. Measuring your progress against an annual budget can give you peace of mind by allowing you to keep a pulse on your operations, understand revenue and expense performance, and make informed, timely decisions. Once you have a budget process in place, keeping it updated is relatively easy. Getting started, however, may be a bit of a challenge. Resolve Works can help you set up and maintain a healthy budget through our small business accounting service. Let’s look at five ways you can keep your budget updated as you go.

 

1. Forecast Your Revenue

Ask the average business where all their money is coming from and the only answer you may get is, “From my clients.” The truth is, many entrepreneurs have a difficult time tracing where revenue is coming in and understanding the value of certain clients or products  Understanding the drivers behind your revenue performance can help you drive new sales and make decisions about which products or services to actively market.  Resolve Works can help you track the income, where you’re generating it, and understand your target revenue volumes.

 

2. Understand Spending Requirements

Let’s start with fixed costs. Your business has built-in expenses  that do not change no matter how much or how little your sales volume is. Our experts can review your bank statements, receipts, and invoices to determine your fixed costs and how you should adjust your budget accordingly. Knowing what you have to spend each month can help you decide how much money you need to bring in and where it needs to go. Examples of fixed costs include:

 

●        Mortgage or rent

●        Business Insurance

●        Salaries

●        Website hosting & Internet

 

3. Understand Variable Expenses

In addition to fixed costs, your business will incur expenses that change with your sales volume or other activity drivers. We refer to these expenses  as variable costs. Although these expenses may seem unpredictable, once you understand the drivers behind them, you can better forecast your spending requirements.  Through our controller services, we can help you understand how your variable costs change with your sales volume and give you tools to better predict your spending so you aren’t left surprised. Some variable expenses may include:

 

●        Business supplies

●        Inventory purchases

●        Hourly and production wages

●        Third-party commissions

●        Employee bonuses based on sales

●        Transportation & travel

●        Facility repairs & maintenance

 

4. Predict One-Time Expenses

It is good practice to put money aside in your budget to handle larger or rare expenses that only occur once in a while. Some of these expenses will be costly while others are small. Both can eat away at your profits or cash flow  if you don’t prepare for them in your budget. The nature of your business will determine what these one-time or annual expenses may be. For instance:

 

●        Large computer software & hardware purchases

●        Furniture & equipment

●        Gifts

●        Building expansion or remodeling

 

5. Hire a Small Business Accounting Company

To keep an updated budget, you should budget for a small business accounting company. Sure, you can do some of your accounting yourself during the startup phase. Eventually, an accounting company will be useful as you try to focus on growing your business. A professional accountant can keep your books straight and help you avoid any legal or tax problems down the road.

 

Resolve Works Offers Comprehensive Accounting & Bookkeeping

In Eden Prairie, small business owners turn to Resolve Works for all their bookkeeping and accounting needs. We provide dependable bookkeeping, accounting, strategic planning, and controller services for small businesses in the Twin Cities area. To find out more about what we offer and schedule an initial consultation, contact our office at 612-293-9368, or you can message us at info@resolve-works.com.