Budgeting

Small business budgeting is crucial, especially in this slow economy. Because budgeting affects both the income and expenses of a company, it is necessary for the survival of today's small business. The obvious and biggest mistake made is not to have a budget at all-this is business suicide! Having said that, it's never too late to start a budget of your own while keeping in mind these major mistakes to avoid:

Be realistic when establishing your budget. Start with your best estimate of your sales revenue target and expenses, both fixed and variable. Variable expenses, such as travel, promotional or staff events can change from month to month but should be estimated as closely as possible. Small business budgeting should also include the cost of goods sold, if applicable. Don't forget to leave some wiggle room for the unexpected repair or replacement based on your business experience.

Be sure to set up a simple system for budgeting. Use the KISS (Keep It Simple, Stupid) philosophy and keep it as easy to use as possible so that you aren't discouraged from staying on top of it. The more complex the system, the less likely you are to be consistent with it. Small business budgeting is crucial, and requires consistency and accountability. Chances are you will be consistent if it's something you can do in a couple of hours per month, as opposed to a couple of days per month!

Don't "set and forget" your budget. Budgets need to be monitored frequently in order to remain effective. Income and expenses you estimated last quarter may be updated with more accurate numbers. Maybe you can eliminate some advertising costs if a particular campaign is not bringing you the desired results. Your budget is not set in stone...don't be afraid to make adjustments as necessary, keeping in mind what your business goals are.

Make marketing expenses a priority in your budget. Marketing often determines the success or failure of your business and should not be given the "scraps" at the end of the budget, or taken from the gross profits. Marketing expenses should be established and built into the budget as it is a vital part of increasing sales. Small business budgeting means getting the most bang for your buck these days when it comes to marketing so examine those expenses carefully and budget for them accordingly.

As you continue your small business budgeting, you will come to appreciate its importance. As a small business owner, it is very likely that you wear many hats so you can see the value in knowing and following your budget while making day-to-day decisions for your business, right?