I know it’s a subject most of us don’t like but in today’s economy it is more important than ever, both for your business and for your personal life.
Do you know what your monthly expenses are? Have you paid attention to your overhead costs? Do you have a sales or income forecast? Do you update the information regularly?
Many of us can ballpark this information, but what happens when a major expense comes along? Do you really know if you can afford a new computer system or the new delivery Van you need?
There are many tools out there to help. Many of them are even free. Just do a web search on budgeting tools, you will find one you like! QuickBooks users have built-in budgeting tools that will take the current or prior year’s information to begin building your budgets with. This saves some data entry time and also picks up a lot of miscellaneous costs you might forget.
Keeping the information up to date is one of the most important tasks once you start using budgeting and forecasting. If scenarios change you need the tools to keep your business flowing and on track.
For instance, many businesses are cyclical in nature, whether it’s a retail store that does 75% of their business during the holiday season or a CPA firm that does 65%+ of their business during tax season. How these businesses manage during the “lean” times of the year matters. Payroll costs can change during these times quite dramatically. Not only must you account for gross payroll, you must also account for the employer’s taxes. Many people forget that part and then wonder why there seems to be a cash shortfall.
Using budgeting tools helps you remember all those one-time or add-on costs that slip through the cracks and wreak financial havoc.
On the personal side, budgeting tools help you see where you spend your money. Are your insurance costs going up? Is your income decreasing? Where can you cut, what can you live without? By tracking where you spend your money and budgeting for the future, you are prepared for those things that life has a way of throwing at you.
Below is a basic budget format that can be tailored to meet your specific needs.
Income:
Sales (or Wages)
Other Business Income
Dividends/Interest
Other Misc Income
Monthly Total __________________
x 12 for an Annual Total __________________
Expenses:
Cost of Sales – COGS
Vehicles – Gas, Maintenance, Repairs, Insurance, DMV
Rent or Mortgage:
Utilities
Payroll Expenses
Insurance – Health, Business, Liability, Worker’s Comp
Telephone
Computer/Internet Expense
Meals & Entertainment
Supplies
Professional Education, Dues, Memberships
Outside Services
Other:
Monthly Total _________________
x 12 for an Annual Total _________________
This is a just a rough guideline to get you thinking about it. For an individual many of these categories are meaningless, so just change them to ones that work. Groceries, Doctors/Dentists, Pets, Education, Daycare, whatever categories you spend money in.
The more personalized you make it, the more likely you will keep it up to date. Check your monthly income and expenses against your budget at the end of each month. How close did you come? Did you underestimate or overestimate your income? Where did you overspend? Underspend? What about things you forgot or unexpected expenditures?
Post a comment and tell me about your experience with budgets, either for business or personal reasons.
