As consumers trying to avoid debt and bankruptcy, they need to be in touch with their spending.Ī helpful article from the Daily Messenger details why consumers need a budget to avoid the stress of debt and possibly bankruptcy. Every dollar a consumer pays in interest is a dollar he or she doesn’t have for something necessary in the future. Ordinary consumers are not like businesses: they don’t borrow money, pay it back with interest, and make a profit. They prevent them from spending where they can’t, and almost everyone can benefit from a budget. Budgets help spenders make good spending choices by keeping track of the money they have to make purchases. Unfortunately, a recent poll revealed that only 32 percent of Americans create a budget to track cash inflow and outflow every month. The keyword is STICK with it.Personal finance educators agree that keeping a budget is the foundation for a viable financial plan, and therefore the foundation that will keep families far from filing bankruptcy. It all starts with a realistic budget that you need to implement and STICK to. This translates to new products, investments in production elements in your business, hiring more employees and creating systems that run the business even when you aren’t there. In the above budget, if I don’t change my expenses, I'd have to create new products, call more of my customers and look for organic ways of improving my products to my customers.īy plugging in your business and understanding what to focus on, you give yourself room to be at your best for your business. You get a frame of what you need to do in the current month to achieve all your business goals. Innovationīy identifying areas of improvement in Step 3, then this is where innovation comes in. This enables you to have a bird’s eye view of the business and not get lost in the tactical day to day work. I will consider buying it next month but save the extra cash this month in the business savings account.
#WHY YOU NEED A BUDGET SOFTWARE#
For example, the software cost in my budget above has an asterisk. The idea is to spend on items that increase your business sales and growth and not consumption-based.Īlso, you can prioritize increasing or reducing certain elements of your budget. All you are doing is asking yourself if really need to spend on a particular item on your budget. Now that the budget has captured all items per Step 2 above, then comes the analysis part. Say 10%, 20% etc depending on the sales and marketing you expect to conduct. It is good to project growth of income by increasing it by a percentage. Check that all routine expenses are captured, and the income amount is based on reality. Pick out your previous month’s sales and expenses and compare them with the budget in Step 1. You can check out an article I wrote on recording expenses and managing business cashflows to learn more. You can then work on increasing your income.Ĭompare with the previous month’s performanceįor the budget in Step 1 to have value it needs to be based or checked against the previous month’s performance. You can go a step further and match the expenses to income and see whether your expenses will be paid by the revenue generated. With this document, you can prioritise the urgent and important payments and know when you can pay them off. This will give you a bird’s eye view of your business income and expense expectations. This includes the routine payments(rent, salaries, utilities etc) and the one-off investments (new equipment, software). Start by having at the top the expected revenue of the first month and below it the expenses for the business.
#WHY YOU NEED A BUDGET HOW TO#
For you to know how to prioritize these, you use a budget (It’s like a to-do list but with amounts to be spent). There are several expenses that you need to pay and further investments for the business. Now that that’s settled, let's tackle why you need a business budget. Aren’t you the one who decided to start a business? You also went a step further to pump in the capital and put an offer in the market. It’s associated with negative emotions and affiliations.īut as an entrepreneur, you need to disassociate yourself from such negative self-talk of budgets. Most folks do not like hearing technical terms like ‘budget’. In business, a budget helps a business prioritize what it needs to do and when. A budget is a plan to tell money where to go.
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