Does my small business need a budget?
Budgeting is an important tool for managing and growing a business. For many small business owners, the word budget is something for a bigger company; maybe they’ll have one when their business grows up. However, every small business owner should budget, no matter the size of your business.
What is a Budget?
“A budget is telling your money where to go instead of wondering where it went” ~ Dave Ramsey
A budget is a plan for your financial obligations; it shows how you will manage all financial resources and expenses for your business. For many, the word budget has a negative connotation. It seems to imply that you will go without rather than documenting what you will achieve. A budget is the latter. Think of a budget as a map; an outline of what where you want to take the business and what you need to achieve to get there. This is why budgets are typically created on a annual basis in conjunction with business planning.
Why is a budget important?
Budgeting for your small business gives you control over your finances. By thinking ahead to expected financial income and obligations, you are creating a plan that provides many benefits. The act of budgeting:
- gives focus
- sets goals
- improves decision making
- aids in the identification of issues
- helps with cash flow management
- assists with tax planning
The end of the year is an ideal time to create your budget. Business goals and strategies have been set via the business planning process and you have recent financial results to use as a guide for expected income and expenses for the coming year. Budgeting for your small business doesn’t need to be an extensive and time consuming process. An upcoming post will provide you with tips and steps – a small-scale approach to budgeting.
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