December 23, 2019 | Read Time: 4 Minutes
You've created a budget and stuck to it for months, but an unforeseen expense threw a wrench in your plan. What do you do now? We've all heard of broken budgets that get thrown aside the instant they get off track. Even though all hope may seem lost, it is possible to revise and refocus your budget! Budgets are a work in process, so you shouldn't be afraid to adjust as you go.
At Huberty, we know that setting a budget for your business helps you reach your goals, but it can also be tricky to keep up with. We've compiled six business budget basics to help keep you focused.
1. Include Anticipated Revenues and Expenses
The best way to start your budget is to forecast all of your anticipated revenues and expenses. It might be impossible to know every source of revenue and expense that will hit your books each month, but balancing your money coming in versus going out will help you stick as close to your budget as possible. Revenue is often more difficult to forecast, but your best guess becomes your goal and your motivation!
2. Include Anticipated Net Income and Plan for a Surplus or Shortfall
Your revenue and expenses may not be consistent each month. Identifying months where your budget may be over or under helps you plan so that your budget isn't thrown off track the second you hit a shortfall.
3. Be Detailed
Being as detailed as possible in your budget helps you identify areas where you are doing well or where there could be an improvement. It is essential to keep in mind that no budget is perfect and that there are always ways to improve where you allocate your money. Being detailed helps you keep a constant eye out for areas to improve your spending.
4. Use Historical Data
History repeats itself — this tends to be true for business budgets, making your historical data a vital asset when setting your budget. However, be sure to keep in mind your sales plan and any anticipated market changes.
5. Compare Year Over Year Data
Almost all business spending has seasonality. Just as every December brings holiday expenses and bonus distribution, all other months tend to have similar expenses and revenues year over year. By comparing your budget to the same time the previous year, you can start to see trends that will help you forecast in the future.
6. Compare Your Budget to Your Actuals
You've set a budget, but it will likely not be spot on every month. Comparing your budget to your actuals for each month and the year to date helps you see how you need to revise the remainder of your budget to ensure you reach your goal at the end of the year.
Setting a budget for your business, analyzing it, and revising where necessary keeps your business accountable to your journey toward your goals. With clear expectations, a business budget can help keep governance, management, and employees on the same page. Not to mention, having a budget for your business highlights the areas where you and your team are performing good business habits.
Contact your closest Huberty office, located in Fond du Lac, Ripon, Sheboygan, Plymouth, Markesan, and Minocqua, to consult with one of our expert advisors!
Huberty is here to help support your business! See how we are here to support you in our other blogs:
Six Hurdles of Business Transitions | Five Top Focus Areas for Business Success | The Recipe to Success | Does Your Business Serve You, or Do You Serve Your Business? | Building a Strategy for Success