Budgeting enables us to be disciplined in our spending and saving so as to reach our short term and long term goals. Proper budgeting is the most effective and significant tool for getting your finances under control. Developing an accurate budget for your business will help you to manage spending as well as investments for optimal profits. Using budgeting tools, you can plan your business strategies appropriately, monitor them as well as adjust your operations accordingly to build your revenues. A business budget helps you to maintain financial control of your business and avoid wastage. Below are some of the budgeting tools you can use for your small business.
Bookkeeping Software Programs
Bookkeeping software programs for small businesses are pretty easy to use because they are customized to fit the needs of small business ventures. These software programs produce an array of financial reports using integrated formulas. After you create your budget, any addition debit or credit entry will automatically be captured giving you an up to date statement of financial position and income statement. The statement of financial position shows organization liabilities, assets and owner’s equity and thus it’s very crucial to have it always up to date. In the same vein, an income statement is a very integral part of financial statements and should always be current to ensure smooth running of business operations.
This is the most common budgeting tool for small businesses. Almost all computers have in-built software that includes spreadsheet which can be used to create a budget as well as a variety of accounting reports. Spreadsheets enable small business owners to create income and expenditure sections where they can record accounting data in real time. The reason why it is the most commonly used budgeting tool by small businesses is that it does not cost business owners a dime since it is absolutely free.
Cash Flow Statements
A cash flow statement is a very useful budgeting tool. Cash flow statements show you when sales money will be received as well as when accounts payable are due. This ensures that you plan your finances appropriately so that you can pay your bills as they fall due. Lack of proper planning can lead to insufficient funds to pay for bills when they fall due even when you have more sales than bills. Therefore, projecting cash flow in advance will enable you to put strategies in place that will allow you to have adequate cash reserves to pay your bills on time.
Formulas are used hand in hand with spreadsheets. Add different formulas to your monthly income and expenditure schedule to get monthly averages. Monthly averages help you to make projections for the entire year using the current rate of sales and expenditures.
Manufacturing and Overhead Breakouts
When you do not have sufficient funds to run your operations smoothly, you have to cut costs of things that are not so important. Overhead breakouts show you the non-manufacturing costs which include insurance, rent, utilities and phones. These are some of the costs you can cut without hurting quality of products and services or interrupting the production. Cutting on manufacturing costs such as labor and materials can adversely affect your operations. Manufacturing and overhead breakouts also helps you to establish your profit margins at various sales levels.
So, you do not have an excuse for having a well crafted and accurate budget for your small business. Utilize one of the discussed budgeting tools and run your business effectively and efficiently to maximum profits as well as minimize costs.
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