We’ve talked about small businesses and their value in previous blog posts. In today’s blog, learn about why a small business budget checklist is essential… and how Virtual CFO is here to help.
What is a Small Business Budget (and Why is it Important?)
We use budgeting in our daily lives. By definition, a budget is a thought-out monetary plan used by individuals and businesses alike.
So what is a small business budget, specifically? A budget used by small businesses involves monitoring the doings of different areas within the business. A few types of budgets that can be established in a small business are:
- Cash budgets
- Operating budgets
- Capital budgets
Small business budgeting is important because it helps business owners develop a paper trail of their business’s income and payments, thus allowing them to ensure that their financial goals are being met.
Limited resources are a commonality in small businesses, especially when that business is just starting out. Having a strong small business budget and enlisting the help of a CFO can help decrease the risk of running out of things you need and potentially going out of business.
Another important part of having a good budget? Developing an emergency fund. Life (and, by extension, business!) can be unpredictable, which is why it’s a good idea to put emergency financial planning into your budget. Reduce the risk of being caught off guard by some unforeseen occurrence and be prepared for anything life – and the economy – could throw at you.
What Makes a Good Budget?
Now that we’ve defined a small business budget and its significance, let’s take a look at what makes a good budget. Your budget should be straightforward and accommodating to your needs and the needs of your business.
A CFO can help you build your budget and keep an eye out for any potential areas that could cause setbacks. Good budgets allow for future plans of your business and recognize prospects that can update and grow your business.
A good budget is made up of seven elements:
- Estimated revenue: the total amount you can expect to make from sales.
- Set Costs: Costs that stay consistent.
- Changeable costs: These costs change based on the production or sales volume.
- One-off costs: these are used for transferring offices, equipment, furniture and software and other costs.
- Cash flow: the currency that comes into and goes out of a business.
- Profit: what you take home after your expenses are subtracted from your business income.
- (Optional) A budget calculator: this is the greatest tool you can have in your pocket when it comes to your business because it gives you a clear picture of where you stand financially.
Small Business Budgeting Templates
In addition to the budget calculator mentioned above, a small business budgeting template is another great tool to have in your financial toolbox. A business budget template can be a table or a spreadsheet with multiple pages. Whichever of these you choose, make sure that:
- You are choosing the right one for you
- It’s something you will actually put to good use and not just leave on your computer or allow to get lost in a sea of paperwork on your desk
- You are updating and creating your budget on a yearly basis
- You are prioritizing regular quarterly and monthly updates
Virtual CFO is Here to Help
For all your business needs, Virtual CFO is here to help. We have highly qualified virtual accountants to help with your financial questions and concerns. Set up an appointment with us today to find out what we can do for you.