There are a host of activities involved in running a small business. As the owner you likely have a schedule that requires a great amount of attention to detail and decision-making. Many, if not all, of the actions you take will involve some element of the company's finances. Ensuring that there is ample cash and knowing how to manage money is a skill that every business owner should develop. Let's look at three components that will help you prepare a more accurate business budget: budgeting, planning, and forecasting
Business budgeting involves the management of your company's financial resources. In order for the process to be done well budget managers should carefully monitor the sources and uses of cash in the business. This is important because it allows you to put your finger on the pulse of financial activity. By understanding what is normal in the course of business such as seasonal revenues or abnormal cash injections you can better project your financial position at a given point in time by becoming familiar with the ebbs and flows of cash.
In planning the allocation of resources there are various tools that can help you in budgeting. Some resources include accounting software that has budgeting features included in them. Some spreadsheet programs also have budgets that are pre-formatted for you. Alternately, if you are tech savvy then you might also choose to design a business budget from scratch. Whatever method you choose remember that your forecasts are only as good as the input that you use. Be sure to use reliable data and double-check formulas that you create in spreadsheet programs.
Forecasting your budget is more of an art than a science. The more research that you do the closer to accurate your numbers will be. Do not simply rely on your instincts. Check out past financial reports to see the ups and downs of your business. If you are starting a new company then you can also get information from other business owners who have companies similar to yours or speaking with an accountant or business consultant that has knowledge of your industry.
Now that you are aware of the role of budgeting in your company and some of the tools that managers use in the process you are on track to creating a budget of your own.