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Saturday, April 6, 2013

Small Business Budgeting - A "Balancing Act"


 A budget is a financial plan and essential for a business to succeed

 It’s a list of all expenses and revenues.

 Also a plan for saving and spending.

 This is the “Balancing Act” part.

A Budget helps to aid the planning of actual operations by forcing business owners/management to consider how the conditions might change and what steps should be taken. And by encouraging the business owner to consider problems before they happen.

  Monitoring all positions (revenue in and expenses) on a routine basis which has the tendency to change. So must the business owner.

This is ‘Adaptability”

 A Solid Budget is necessary to:

   Control Resources

   To Monitor Expenditures

   To Provide Visibility into the Company's Performance

 Cash Flow/Cash Budget – a projection of future cash flow and expenditures for a particular time period.

 It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when and if the company will need to seek outside financing.

 Marketing Budget – an estimate of the funds needed for promotion, advertising, in order to market the product or service.

 Project Budget – a prediction of the costs associated with a particular   business/company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.


 1. Watch your cash flow. If you want to stick to a budget, make sure that your cash inflow is more than your cash outflow. Monitor your income closely to make certain that you'll have adequate funds to pay your bills, particularly if your business is prone to long lapses between cash in-flow/revenue.

 Cash-flow problems are what kill most small businesses. Keep checking to make certain that your revenues match your expenses.

 2. Lean on the side of being conservative (underestimating cash inflow). When setting up your budget it’s a good idea to overstate (over estimate) your expenses and low-ball (underestimate) your expected revenue/cash flow. That approach is also a solid strategy when making sure your cash flow is going to hold up. Look into saving money and budget savers.

 "Money you don't spend is money you don't have to earn."

  Or   “Money Saved is Money Earned”.

 3. Build a cash cushion. The uncertainty of budgeting — both in terms of income as well as expenses — stands as one of the biggest threats to the survival and success of any small business.

 Trimming   expenses   to the bone is a good idea. It's also smart to set aside income whenever possible. If you can afford it, allocate a portion of every paycheck you get and put those funds away.  It can prove an essential lifesaver should an unexpectedly high bill suddenly crop up and usually does at some point in the life of a small business.

 James J. Pastore,  SCORE Counselor/Consultant

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