Company Cost Control: How To Budget When You Don’t Have One

 

A small business owner is typically dealing with too many business issues to think about a budget, but spending a little time thinking about a budget does save money. Budgets are largely associated with huge mega-corporations who have hundreds of accountants, lawyers and managers on staff to help in this endeavor. The fact is that a small business needs a budget just like any other entity in the economic world. Even the United States federal government has a budget, although it normally does not stick to it.

Budgets are future plans for the use of financial resources. Budgets come in many forms, including sales budget, cash budget, production budget and direct materials budget. Time frames are also considered in forming budgets, such as monthly, quarterly or yearly. To help combat budget challenges, sit down for 30 minutes a month with a pencil and a piece of scrap paper, and scribble down projected monthly revenues and expenses. Essentially, create a perpetual 12 month rolling budgeted income statement.

As a small business owner, one does not have tons of resources for counting every penny in the organization, but the idea here is to make an estimate. Calculate revenues — how many widgets are typically sold and for how much? Calculate expenses — rent, electricity, widget materials, postage, gasoline, salaries, etc. It does not have to be fancy. Just sit down and try to get a handle on the problem.

Budgets are estimates about the future. They help in controlling costs by setting limits on spending. In the corporate world, companies set aside training budgets. Unfortunately, during poor economic times, these budgets get scaled down significantly. It is also important to recognize people need budgets for their own personal lives too. When times are good, folks take vacations, but contrarily, when times are tight, the tendency is to avoid eating junk food at the drive-thru window since the cost is prohibitive compared to home cooking. Point being, nonetheless, make a budget and stick to it.

 

 

This article was written by Richard Carranza of Examiner.com for CBS Small Business Pulse.

 

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