Budgeting is an important part of reaching your financial goals, and a powerful tool for any business owner. A budget is used to regulate how quickly and in what ways your money is being used. Using this tool helps maintain short and long term financial plans, which allows you to control your cash flows instead of the other way around.
Here are some tips to help you mange your resources and create a successful budget.
Know Where You’re Going
Think big picture. You need an idea of where you want to go and create SMART (specific, measurable, attainable, realistic, and timely) goals to get there. This will help you make better decisions when allocating your money.
Track Your Spending
Keep track of your expenses for at least one month. Record every purchase, no matter how small. This will help you scrutinize your spending and see what small changes can be made in order save later.
You can automatically track spending with apps like Mint, but many people find that the most effective way is to simply save their receipts and add them up every month.
Give Yourself Some Wiggle Room
Overestimate your expenses and underestimate your income. Things happen and unexpected problems occur, so it’s good to incorporate some financial cushions. It’s hard to know exactly what to expect, especially if you’re a startup.
Make Savings Automatically
Treat long-term savings as a monthly expense. A good rule of thumb is to allocate 10% – 15% of your earnings toward your savings. Having this done automatically benefits you because you never have to think about it, and your savings will continue to grow.
Don’t Be Afraid to Adjust
Flexibility is important, so don’t be afraid to adjust your budget. As the business environment changes, your business might need to change too.
Budgeting won’t work if you make unrealistic assumptions right off the bat. Take small steps and try not to jump to huge conclusions about your outcomes. The best way to do this is to base your numbers on real data, so take some time to analyze your bank statements and spending habits.
Learn more about cash flow and how to set appropriate goals in our free ebook: The Ultimate Guide to Accounting For Startups.