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Running
a business without a budget is like navigating a ship without a compass.
Setting aside time to examine and revise your budget periodically gives you
more options when making important decisions about where your company should
be going and growing.
The
first step in developing an accurate and reliable budget is to take a look
at your finances. Review income and expenses. Previous records, financial
statements and tax returns are important documents for reviewing. If you are
just getting started, consider using a budget from a similar business as a
model. An experienced accountant may be able to provide you with some
samples and standard benchmarks for a business of your type.
Once you have compiled all your documents and information, list your
expenses. Consider whether you want to develop a budget for three, six or
twelve months. Create appropriate categories for all of your expenses: rent,
wages, inventory. Always remember to set aside money for emergencies, slow
business periods and economic downturns. If your business is just getting
started, you may decide to create a budget for a short time so that you can
start to analyze your spending patterns, cash flow and inventory.
Analyzing
your spending trends and considering your finances will help you project
amounts for each category of your budget. Always remember to routinely
re-examine your budget. You may want to create benchmarks for shorter
periods. Budgets with benchmarks for month-long or two-week periods can make
the whole process easier to manage. Review
the numbers periodically and adjust them if your business conditions change.
Once
you have a working budget, it’s important to stay on course and stick to
it. Sharing it with your team, financial advisors and accountant can help
you cruise successfully into the size of business you have envisioned for
yourself.
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