Every business, whether big or small, requires a budget to run smoothly. A budget helps you make sound fiscal decisions, identify where to cut costs or source funds and aids in reaching financial goals.

How to create your business budget on a budget

How you make a budget for your business is not the same as how someone else would as various factors contribute to this. For instance, you might not have the same financial muscles as your competitors, or you might have higher production costs. Either way, consider the following tips when making a business budget, especially if you are on a budget.

1. Analyze your income sources

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You can only budget for funds that you have; you must figure out how much money your business generates in a month and where it comes from. First, consider the figures for your monthly sales. Next, you can analyze any other sources of income that your business might have throughout the month, depending on your business model.

For instance, a freelance business can have varying sources of income, such as freelance writing projects and writing for your website. Regardless of the sources for your business' income, it would be best to analyze all of them.

2. Determine what your fixed costs are

How you handle your income will depend on what your costs are. First, start by determining your fixed costs (costs that recur from month to month). In most cases, fixed costs include rent, utilities such as power and internet and payroll costs, amongst others. If your business is new, and you do not know your exact costs, use your projected costs to make your budget.

It is important to note that even though you have a projected income for your business, some expenses, whether fixed or otherwise, can flow over the budgeted amount. In that case, even though you are on a budget, always factor in some slack for such scenarios.

3. Devise ways to cut your costs

Even for small businesses on small budgets, you might find yourself in a situation where you have to pay for a crucial bill, advertise, or take advantage of a great opportunity that requires money. Cost-cutting is an effective method to make sure you remain afloat and can cater to emergencies.

Some of the options for cutting costs that you can explore include: reducing supply expenses, reducing the cost of production, modernizing your marketing efforts and cutting down on your frivolous expenditures.

4. Utilize the right budgeting tools

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Fortunately, the current fast-paced technological world has seen that we have the tools for almost every aspect of life, budgeting tools included. Budgeting on Excel may not be the easiest thing to do for everybody. However, you can take advantage of the budgeting software that usually comes built into your Excel program and let it assist you in creating a budget.

Budgeting tools are efficient, easy to analyze and timesaving as long as you find one that works for you.

5. Share your budget

A budget of how a business should run is not a secret; share it. This way, you can combine ideas with everybody in your business setup and develop an even better budget that will steer your business forward. Sharing your budget increases transparency and feedback, and keeps everyone on their toes. Other factors to consider when making your budget include being conservative, flexible and realistic.

Key takeaways

A business budget is critical both for big and small businesses. It helps you identify where you can cut your costs, make sound financial decisions and show your business' progress.

For a business on a budget, creating an ideal budget can be very tricky. However, considering some factors such as your business' income, cutting your costs, identifying your fixed costs, utilizing budgeting tools and sharing it with your colleagues takes you a step closer to achieving your financial goals.