Do you run a business and have problems figuring out how to make a budget?
Making a monthly budget at home can get a little tricky if you run a business that has fluctuating income. Without having an exact idea of your earnings each month it becomes difficult to make a budget and stick to it. So let’s try to understand how to make a budget if you run a business with some techniques to begin with.
Separate your expenses
One problem that most business owners face is to separate out their office expenses from their home expenses. There are multiple things like your vehicle that you might use for both purposes however it’s vota; to get an idea and figure out a way to separate and keep track of both expenses separately. Remember you can’t manage what you can’t measure.
Pay yourself a salary
If you are an independent business, your take home each month can vary. In fact, it becomes difficult to understand what percent of your business profits do you want to reinvest in the business and how much of it do you want to take home. To better manage things it’s advisable to pay yourself a fixed salary each month and an add on bonus if the profits go way beyond what you might need for your reinvestment and expansion plans. To make a budget for your home expenses or to make a budget for your startup you need to know how much extra cash you have in each place.
Plan your expenses
Now that you have a clearer view of both your business and home expenses and also have a decent understanding of your take home income and cash for business expansion you can spend time on planning your expenses. For your home you might want to separate your expenses in major categories like rent, food, outings etc. For your office expenses you might want to do a similar thing with different categories like Machinery, labour cost etc and then assign an amount that you think is justified for it. These numbers might not work out everytime and will be estimates based on your past records however the idea is to understand them and improve them. Also, do not forget to save and invest at least 20% of your take home before preparing a budget for your home expenses.
The whole idea behind making a budget and following it is to better understand your spending habits and have better control over them. Your first attempt at making a budget might not go so well however it is important to review and adjust it regularly. Your estimates for certain expenses might end up being lower or higher. It will then become your decision on whether you want to adjust your budget to meet your spending incase you underestimated or adjust your spending to meet your budget incase you overspent.