Seriously though a successful business needs to have a business budget and not one that you set up before you start and then put away somewhere and forget about it – Your business budget needs to be one that you can measure the actual income and expenditure that is going on in your business against what you thought was going to be the income and expenditure and then make any adjustments that need to be made.
If you are serious about building a business you will find that there are expenses that need to be paid even before you get out of bed in the morning!
So what should a good budget look like:
It includes all of the expenses/ costs of running your business:
Many businesses start out being run on the kitchen table and so you may not be fully aware of what it is costing you because your home budget is covering the cost of your business electricity and phone and Internet but you should be aware at least of the usage of those things and your accountant will actually ask you for that information when they are completing your end of year financials. This needs to be taken into consideration when you take the next step of moving from your home into your own business premises.
It includes paying yourself a wage for the time that you put into your business.
I see so many new businesses that do not pay themselves a wage and this is so important. If your prices or sales are not covering the cost of production plus paying you a wage for the time you spend working in that business, you are actually working for nothing. That’s fine if you are a not for profit venture but if you are wanting to build a business that provides for your future – you need to be thinking wage for your time spent running the business
It also needs to have a provision for putting away money for tax and gst (if you are registered) and also your superannuation.
If you employ people you are also responsible for putting away for their tax and super as well. These elements alone can be the downfall of a new business as the unsuspecting business owner can be merrily going along spending everything that is coming into the business only to find they end up with a huge tax bill at the end of the financial year. For more information regarding this the ATO. Gov website is very helpful so please see the link below so that you are more informed and ready for this inevitable expense
I believe that a good business budget should also include an area for emergencies – so a regular saving to build an emergency fund for the unforeseen – yes they happen in business as well as the home.
And last but not least I think there needs to be a savings element of the business.
This portion can be used for various things. Costs involved with growing the business (further studies, tools and equipment, networking, marketing, and even bonuses for staff or birthday gifts for staff or training days)
So there we have it a few vital elements of a great business budget.