Budgeting skills are essential knowledge for anyone managing a business, and this is especially true for new entrepreneurs who are looking to enter the business world on a sturdy leg. Small businesses are no joke, and piloting one means keeping one’s eyes ahead, while always knowing how to gauge your peripherals and keep it from crashing.
While some things go without saying for business leaders, finance and budget tips bear repeating. Look the 16 tips below, which offer some insight on budgeting for your business.
- Keep your personal life separated from business finances, which will ultimately help you with your budget. The commingling of personal and business can distort accuracy. You won’t have an accurate estimation of how much money your business grossed or how much it might need to succeed. Payroll is one of the biggest costs that a business has, so you must identify how much it will cost to pay your salary. The use of appropriate budgeting techniques and credit cards will starve off future obstacles.
- Don’t forget about your taxes, which is a recurring expense that’s sometimes left out of financial calculations. It’s recommended that you open a separate bank account and deposit 20 percent of gross revenue or up to 35 percent of your monthly net income. Failing to plan ahead for taxes can lead to a late fee or an audit.
- It’s important that first-time entrepreneurs, hold on to all of your receipts, and kept them organized. While many first-entrepreneurs take their largest expenses into account, they sometimes fail to account for overtime and smaller costs. Keeping those receipts on hand offers a clear understanding of your budgets and your finances, providing a glimpse into growth-related expenditures.
- Lean on your supplier if you feel like prices are a little too steep for you. As long as you’re polite, it doesn’t hurt to try to cut costs. Inquire if you can get a discount if you purchase in bulk or if you can get a discount by paying for supplies upfront.
- Always search for the best deal. By investigating your options, you’re more likely to save your business money in the long run.
- Understand that loss is on the table, and a good way to make sure that you hold to what you have is to shed some non-essential expenses.
- Overestimate your expenses when you’re planning for the future. If you do this, you won’t be devastated if a surprise cost takes you by surprise.
- Rather than hiring costly full-time employees, hire freelance writers, designers, and delivery people. Do so means that you’ll save money on training, hiring, and sourcing. Additionally, you’ll save money when it comes taxes, fees, and payroll.
- However, when you choose to hire your employees and budget for salary, consider the cost of training materials, insurance, taxes, payroll fees, and additional equipment.
- Shop smart and try to buy used furniture, equipment, and electronics, which will cut down on costs. However, don’t skimp on things you need.
- Brick-and-mortar locations are attractive, but when you’re starting out as an entrepreneur, it’s important that you notice that rent, furniture, and transportation can cost you thousands. If you sincerely require a physical location, then try working out of your home. You can even receive tax deductions if you opt to operate out of your home-based office.
- Use Mint and similar budgeting software to help you analyze, track, and monitor your spending. There are some intuitive and free programs you can use that will aid with online management of cash and spending analysis.
- When you’re looking to create a small business, you’ll have to bear your credit in mind, which is important if you’re interested in taking out a loan. Also, if you happen to take out a loan and you’re late with repayments, it could hurt your credit score and your business. Plan loan repayments within the monthly and yearly budget.
- Partner with other business professionals and save money on promotion, flyering, and overall advertising. If you split costs, you’re saving money.
- Seek out free advertising by reaching out to news publications to cover your events, pumping up your social media presence, and by volunteering at local events where you can advertise your business and connect with potential customers. Joining an industry association can offer you a network, which is great for word-of-mouth, discounts, and finding new ideas.
- Insurance is an important expense that’s not worth skipping. Budgeting for insurance before an incident can ultimately save your business.
Ajay Nagpal, the Chief Operating Officer at investment management firm Millennium. Ajay Nagpal supports social entrepreneurship through his work as a Board member of Echoing Green. Please visit his social entrepreneurship blog to learn more about that! Also, find him on Behance!