As an entrepreneur, it is essential to know how to properly manage both your personal finances and your business finances. At its simplest form, budgeting is the creation of a spending plan to determine in advance your income and outgoing expenses. This allows you to plan for the future and ensure that you know how much to pay yourself and how much to allocate for your business. Many business owners don’t have a plan to distribute finances which can ultimately lead to the company’s financial instability. While most everyone is familiar with budgeting in one way or another, many small and mid-sized business owners don’t take the time to develop a proper budgeting plan for their business that differs from their personal spending plan. Starting with a personal budget ensures that you get paid what you need while securing the health of your business. At Agile Planners, we understand that budgeting is the basis for all business success and have created a free budget worksheet to help you better manage your personal and business finances.
Similarities Between Personal & Business Budgeting
Business owners will be happy to hear that personal and business budgeting actually have a lot in common. The core of both spending plans is managing money to project and track income and expenses. What changes is the scope of the finances and the different factors you must account for. With both spending plans, you need to project income, expenses, and finally profit (or savings in a personal budget) for a certain time period — month, quarter, year, etc. You also need to establish your objectives (what it is that you’re saving/budgeting for) and track your progress to ensure you stay on track and are able to make adjustments if necessary.
Differences Between Personal & Business Budgeting
Business spending plans have more factors that come into play. First of all, forecasting the amount of money that comes in is significantly more difficult, yet iit is critical that it is done correctly. Personal income when employed by another company tends to be fairly consistent, especially when it is salary based, but business revenue can be irregular due to the market or season. As such, business owners should consistently work on their budget to be better prepared for the months ahead and continuously ensure a profit. Apart from sales and revenue, businesses must also consider fixed and variable expenses, debt service, additional taxes, and fluctuations or one-time events. The overall goal of budgeting for a business is to ensure profitability and that can only be achieved by planning for the future.
Small & Mid-Sized Business Budgeting Services
Business budgets serve much the same purpose and it’s important to practice both as they are crucial for achieving financial goals. One of the primary reasons new businesses fail is not taking the time to project revenue and expenses to ensure that there is more money coming in than going out. Proper budgeting, like most things, can take time to fully grasp but as you continue it, you’ll be able to pick up on patterns and trends in your income/revenue and spending habits to make better informed decisions. Seeking the help of a financial specialist, such as Agile Planners, is another great way to ensure finances are in order right from the get-go. Contact us today for more information or refer to our free personal and business budget worksheet to begin taking control of your finances.