(From the editor: This article was originally published on Xerox.)
Tired of avoiding your business or personal budget? Just saying the word ‘budget’, you can usually hear a collective groan…that’s because many individuals and small business owners are no strangers to cash flow problems. In fact, roughly 50% of small businesses go out of business within the first five years of opening their doors.1
But small business and personal budgets don’t have to be punitive or restrictive. A healthy and realistic budget is actually more like a long range day planner that details your finances within the bigger picture of your obligations and goals. Learn the secrets of making a strong budget plan and how to maximize your money to realize your dreams and what you have worked so hard to achieve.
Identify Your Needs
If you are new to your business, you may want to do some research in your industry to see what similar businesses cost to run. For seasoned small business owners and everyday people, revisiting needs and expenses is important to being “on good terms” with your budget. Remember, your money and where it’s going is the foundation of how you are able to make your way in the world. Being intentional with its use puts you in charge of your life.
Business and Office Budgets
Start with the staple expenses such as the mortgage or lease. Home business owners may be able to use office space as a deduction in addition to other expenses and should consult a tax professional for advice. Making a budget plan also includes these line items:
- Utilities, equipment, furniture and machinery
- Vehicles and transportation or delivery expenses
- Maintenance (of building if owned, in addition to machinery and office equipment)
- Insurance and wages including benefits
- Supplies, plus costs of maintaining inventory
- Lines of credit or loan payments
- Advertising, marketing, business club costs and travel
- Tax preparation and services
Once you have accounted for all expenditures, calculate your income and keep track in any number of available expense spreadsheets. Allocate the funds required and when they are due, noting which are fixed and which are variable (as well as the months that require different costs); and calendarize to be able to plan in advance.
If you can anticipate any big costs you can take steps early to prepare or even delay the cost, like extending a vehicle lease, or updating instead of replacing older computer equipment. Remember, no budget is static – accepting its fluidity makes it easier to ride the ups and downs.
Your personal budget works the same way as a business budget in listing expenses out with income generated. Fundamental to making a healthy budget plan is getting a handle on debt, and that means facing what is needed to pay it off. Start with making a schedule: knowing what is due when cushions the impact if things are tight.
Don’t be afraid to trim the budget to where it needs to be to get back on track down the road; cut up credit cards and use cash/debit card until debt is reduced, eliminated or manageable. Always acknowledge victories and keep creating goals, even in the midst of austerity you have to dream.
Making More Budget Freedom
Making the most of your budget translates into more financial freedom, and greater opportunity to live more fully. Revisiting your budget often and paying attention to creeping costs and inefficiencies can help make your money and your hard work go further.
- Evaluate the big ticket items: Can you downsize to a smaller office or storefront? The savings could be substantial. Or consider if your business is something that could be run virtually from your home; the tax benefits are big not to mention the other money-saving perks – no commuting time, easy scalability, reduced overhead and more flexibility.
- Is your office equipment outdated and underperforming? Advanced technology such as Xerox® ConnectKey® printers can help you replace manual processes like scanning, old-fashioned routing of documents and in collaboration by file sharing to keep everyone on the same page.
- Timing is everything: Wait to make purchases at the start of the new billing cycle or look into better payment terms from your suppliers or creditors, and take advantage of promotions such as the Xerox instant savings and rebates on new printers. When large expenses are coming up, if necessary plan ahead with cost-saving preparations like suspending outside services you can cut back on temporarily (advertising/marketing services, overnight or express costs, travel, memberships, etc.) And review your insurance provider’s and bank’s statements to see if you can reduce fees or switch to a less pricey policy or no-fee account (offered by most credit unions.)
- All together now: Pooling resources with other small businesses (or individuals when it comes to personal budgeting) is a novel way to buy supplies, inventory, and equipment. Cooperatives and resource libraries are new ways to share/borrow resources and partner networks include some credit card issuers that offer discounts with partner vendors.
Whether you’re new to business or a seasoned veteran, a budget you can live with (and love) is an ongoing challenge. Keeping yourself organized, being intentional with your budget and consistently evaluating your spending will help you to keep yourself on track and maximize your money!