As many small businesses look for ways to bounce back from the many financial pressures of rising inflation, it can be difficult to pinpoint exactly where to start. Thus budgeting for your future is important.

Whether business leaders like it or not, a budget will be the guiding force that helps them get back on their feet and make strides towards a financially fit future.

Where are your main sources of income coming from?

Start by looking at your sales figures, and then add any other sources of income for your business throughout the month.

Do you run any additional services alongside your main product or service offering? This can all add up when it comes to funds coming into your business.

No matter how many income sources you have, it’s essential to account for any and all income flowing into your business. Then tally all those sources to get a clear picture of your total monthly income.

You may also want to differentiate between recurring and one-off income in your accounting software. If you decide to take on any external funding down the track, this will demonstrate consistent revenue to potential investors.

Once you’ve sorted out your streams of income, now it’s time to get a handle on your fixed costs.

Fixed costs are any expenses that remain the same from month to month. These include your rent or mortgage, any loan repayments, as well as operating overheads like recurring equipment leasing payments, licenses, or insurances.

Are there ways you can cut down on these fixed costs? Perhaps refinancing your property mortgage or negotiating a lower interest rate for your loan might be a solution? It’s usually worth doing your research into different, more cost-effective platforms. Even if you don’t feel like you have time to look at your loan, it is important to always revisit your options and do your research on new products and rates in the market. With interest rates constantly on the move, it is worth allocating time to assess the options available.

At the end of each month, work out your variable expenses. These costs don’t come with a fixed price tag and can vary in price from month to month, such as electricity, phone bills, or water bills.

These costs can often fluctuate based on usage, so it’s a good idea to go through them with a fine-tooth comb to work out which expenses you need and what ones you can opt out of. Especially if your team only works from the office flexibly instead of full-time. Still, paying for that unused Spotify subscription for office beats?

Maybe the water cooler is no longer on duty, or the fax machine is out of commission? Do you really need to order that extra box of whiteboard markers and backup printer ink? One benefit of transitioning to remote or hybrid working arrangements is that you can cut out any unnecessary expenses that you’re not using regularly anymore.

As a business owner, you’ll know that accidents, issues or a once-in-a-lifetime pandemic can happen. Whether your computer system crashes, the toaster sparks a fire or a freak flood creates water damage, you need to be prepared for any unexpected costs.

Make sure you have some extra funds (around three months worth) tucked away for a rainy day, so you have peace of mind that you’re equipped to cover any surprise costs that come your way.

Once you’ve worked out a snapshot of your profit and loss, and you can determine what needs to be covered in your monthly budget, stick to the budget and track its success.

Health-check your budget at least once a month to ensure you have more revenue coming in than costs going out.

Are you actually maintaining your budget? Or blowing it? What expenses can you minimise? Do you have extra budget to play with? Do you really need another desk plant or novelty mug to get the job done? (spoiler: you don’t).

Again, for those businesses eventually looking to raise capital, demonstrating the ability to maintain a lean-burn rate is gold to investors.

In order to be profitable and accurately budget for the future, it’s important to make the necessary adjustments and be realistic with your financial picture.

As a business owner, you will always have expenses, it is part of running a company, but that doesn’t mean that it needs to be a dead cost for the business.

It is always a good idea to look at your options and think of ways to make your money work better for you.

Think about different ways to manage your cash flow. Always consider taking advantage of loyalty points and how you can use your business expenses to gain rewards through the loyalty programs on offer.

Original Article: https://www.smallbusinessanswers.com.au/news/budgeting-for-your-future/