Creating a business budget involves your company’s entire team. Everyone makes a pitch about strategies to implement and campaigns to launch. All these need resources you need to distribute effectively to realize their potential. Negative and positive factors influence the amount of funding a particular project or campaign may receive. Knowing these factors allows you to balance your budget and keep your business profitable.

These are the factors you need to consider when creating a business budget.

Amount of Available Funds

Before you create a budget, you must determine your business’ current financial standing. You might make a budget that’s unrealistic because of a constricted cash flow, low revenues, few sources of income, and unpaid dues. All these influence the size of available resources you can use. Base your budget on a realistic amount. Analyze your sources of income, review your expenses, and include profits whenever you calculate your business budget.

Long-Term Company Objectives

It’s important that you create a budget that includes the long-term objectives of your company. Your long-term goals also need resources so that you can achieve them within the timeframe you established. You’ll need to set funds aside so that you can accomplish each phase of your long-term objectives. You don’t have to sacrifice your short-term goals. Find a balance between your short and long-term objectives and allocate resources effectively. Delineate tasks among your employees so that the work they do contributes to both goals you established.

Current Events

Current events can influence your company’s budget because it may affect the prices of materials you need, delivery schedules, interest rates, cost of transactions, restrictions, and others. Wars, pandemics, elections, and other similar events are beyond your control. Get as much information about these events so that you’ll know if they have a substantial effect on your supply chains, business partners, orders, and others. Create a rolling budget that accounts for current events. This allows you to adjust the resources you distribute to different aspects of your business operations.

Government Laws and Regulations

Local or international laws and regulations may have an effect on your budget because of the changes in taxes, fees for transactions, interest rates, supply chain agreements. These could either increase or decrease the expenses you incur to maintain operations. Monitor possible changes in city laws or regulations so that you can factor these into your computation. Read or watch the news to keep abreast of the latest developments in your city.

Estimated Return on Investment

Estimations are part of planning and budgeting. Compute your business’ possible return on investment (ROI) so that you can include this in your projected budget. Your ROI influences your cash flow whether positive or negative. A low ROI results in fewer resources to grow your business, develop and implement strategies or campaigns, and target new customers.

Cash Flow

It’s important to always aim for positive cash flow. The latter is your company’s lifeblood even if revenues are unstable at any point within an accounting period. Positive cash flow keeps resources flowing to various aspects of your company. Poor cash flow constricts your financial flexibility and has a negative effect on your budget. You might use more funds than you want because of overspending and low sales. Identify possible causes of poor cash flow so that you can find an immediate solution.

Trends in an Industry

The niche of your business may undergo trends that shift the purchasing behaviors of customers, your competitors may change the products or services they offer, or changes of prices in your supply chain. When creating a business budget, you should consider these trends in your computations. These might be seasonal or temporary changes that can either increase or decrease your costs. Keep a cash reserve that stretches beyond a month or longer. This practice allows you to keep cash flowing into your business despite short or long-term trends in your niche.

Ways to Maintain Your Business Budget

Now that you know the factors that go into creating a business budget, you’ll need to implement ways to stay within it.

1. Always separate your personal expenses from your business. Create a separate bank account and credit card for your company. The temptation to use your company’s money for personal use is high. It takes a conscious effort to keep the two separate.
2. Pay your dues on time, all the time. Late payments incur penalties and additional fees. Schedule your payments using accounting software so that you won’t miss them. Monitor short and long-term debts and set resources aside to fulfill them. Negotiate contracts if possible so that you can get favorable payment terms without incurring a penalty.
3. Overspending drains your resources and limits your business’ financial flexibility. Limit your spending to profitable investments and marketing campaigns. Find ways to cut costs without sacrificing productivity, efficiency, and profitability. Review your bills, office equipment and furniture, office space, and others. Doing so allows you to identify where you can cut costs and save more money.
4. Keep your accounting books error-free. Mistakes in your books may incur penalties when it’s time to pay taxes or you might miss deductibles that could save you more money. Your team needs financial data whenever they create a budget for the ideas and campaigns, they pitch to you. If your team lacks the experience and skills to do bookkeeping properly, you might want to consider outsourcing this task instead. Outsourced virtual bookkeepers have the know-how to keep your accounting books updated without mistakes. They can give you access to a cloud-based system that keeps your financial data secure.

Creating a business budget allows you to manage the growth of your business. It’s insufficient to just create a budget, you should follow and maintain it to allocate resources to various aspects of your business effectively.

If you need assistance with bookkeeping, we at Robookkeeper can provide you with the expertise and experience you need. We offer first-rate virtual bookkeeping services. Our team of bookkeepers can update your accounting books, create financial reports, reconcile your accounts, and other accounting-related tasks you might require. We use cloud-based accounting software to keep your data safe and accessible wherever you are and whenever you need it.