Budgeting for Small Business Success Made Simple

Budgeting for your small business is probably the most critical task you could undertake if you want to know how to make a business successful.

The reason small business owners don’t do a very good job at it is because they are intimidated. Some think it’s too difficult or complicated. Others think budgeting will cramp their creative ability.

Neither conclusion is true. As a matter of fact, you can be more creative if you adapt a few simple techniques when you budget for your small business.

Understand that budgeting is a tool. Done well, it tells you what you’re doing right and what needs attention. By making sure that your business is healthy (profitable) you’ll be able to be more creative – as long as there is a market willing to pay for what you create. By keeping good records it will also be easier for you to get small business loans if and when you need them.

If, on the other hand, you ignore your budget, what will happen? You’ll either go out of business or you’ll struggle more than you have to. Neither is very conducive to creativity. That can also lead to bankruptcy and other nasty consequences.

What are the steps to budgeting for small business success? Glad you asked:

1. Commit.

Stop thinking about whether or not you need a budget. You do. You may not like it. You may not enjoy it, but it doesn’t matter. If you want your business to survive, you have to have a budget. Period.  It’s no less important than having enough working capital or the right kind of business insurance.

Once you start doing it, you’ll probably love it because you’ll be able to make much better business decisions. But even if you don’t enjoy it, keep it up.

Now….after you’ve done this for a while, expect a voice in your head to start whispering secret messages:

“You’re no good at budgeting,” or…

“You don’t really need to do this.”

Ignore those secret messages. They are lies.

Remember…you have to be committed. That means even when you hear those voices, you’re not going to listen. Even when you don’t feel like keeping up with your budget, you’re going to do it anyway.

2. Suit up.

Budgeting is simply taking what you expect to spend each month on your business and comparing it to what you actually spent.

This means you have to:

a. Keep a record of what you expect to spend.

b. Keep track of what you actually do spend.

You can do this with pen and paper, a spreadsheet or a software package. The first two options are free. The better software packages cost money.

I recommend using a software package.

Given the importance of the subject, I wouldn’t worry about the cost. A good program costs somewhere south of $60. If you figure you’re going to use it for several years, you can consider the cost a non-issue. If you get a program that does the job, and it’s one you like and use, it’s worth it. In fact, if you do end up buying a program, you’ll make your investment back several times over each month. That’s how much money you’ll save. At least that’s been my experience.

I’ve been using QuickBooks for years. I started using this program because it was the one my CPA recommended. That was before other programs like You Need A Budget came on the scene.

You Need A Budget is a much better program for budgeting in my opinion because it’s very easy to use, has great tutorials and, most important, is unparalleled in its ability to tell you what you need to do differently.

The only rub is that most accountants don’t use YNAB. The CPAs love to get QuickBooks files they can just download and use to prepare your taxes.

I know that YNAB allows you to export the data into a CSV or QIF file. If you go this route, your CPA might be OK with that. She could simply take the file and import it into Quicken or QuickBooks.  But it is one more step and a bit of hassle I suppose.

If your business is small and you don’t need lots of accounting features (like payroll and depreciation schedules), YNAB is great because of its budgeting genius. But if you do need accounting features, QuickBooks is a better choice.  The budgeting features aren’t as strong, but you get a lot for your money.  QuickBooks will be a little harder to learn – but trust me, it won’t be that tough.

3. Hire and fire a Bookkeeper.

If you know that you won’t spend the time to learn a program and/or won’t update your budget each month, hire someone who will do this for you.

You can easily find a bookkeeper to come in twice a month to update your books. This will cost you about $100 a month. If it’s between spending that money and not having a budget, it’s the best $100 you’ll ever spend on your business.

But go a step further. Tell the bookkeeper to spend an extra hour each visit and teach you how to use the program.  In order to get the real power of the information, you have to be on top of your budget. And the only way to do that is to do it yourself.

When I started my business I had a bookkeeper do my books. Then I asked one of the people who work for me to do it.  I took over the task myself a few years ago and it was the smartest thing I could have done.  I immediately knew where I was wasting money and where I needed to invest more.

It has been a game changer in my business and I know it’ll do the same thing for you.  Ultimately, if you have a small business, you need to be on top of where you are making money and where you are spending money. Following your budget is the only way you’ll get this information. The task is too important to put off or outsource.

It’s not difficult and it won’t take you long to master it. It is the most important idea you need to implement for your small business.