Math is hard. Money is hard. Developing and sticking to a budget for your business is even harder, but it doesn’t have to be impossible. The idea of developing a budget can be overwhelming, especially when money is on the line. It’s easy to make mistakes that in some cases can lead to costly repercussions. It’s important to understand common budgeting mistakes so that you can know what pitfalls to avoid and set yourself up for success. Keep reading as we review 3 common budgeting mistakes made by small businesses and how you can overcome them.
1) Guessing at costs
Creating a budget from scratch and coming up with accurate figures for your monthly expenses can be challenging. It’s easier to budget your fixed costs such as rent and payroll, but what about your variable expenses like office supplies or maintenance? These varied costs can be tempting to estimate but approximating these expenses can ruin your budget before you even start using it. Instead of guessing, review your bank statements and analyze your transaction history. By taking a look at your records, you can build your budget around your real monthly spending habits.
2) Being too restrictive
While it’s good to be diligent about saving money, you can definitely do too much of a good thing. Sticking to a budget that is too strict is usually not sustainable. Ensure that you are setting realistic limits. It’s important to strike a balance between living within your means and treating yourself…once in a while. You don’t want your budget to be so rigid that it controls all aspects of your life and business; no one wants to live around an uncompromising budget plan.
3) Not accounting for saving
When you neglect your savings, you limit your financial progress. By building your savings into your budget, you can ensure that you are working towards your financial goals each month. A great way to manage your savings is to automate your savings transfers each payday so that your money is moved from your chequing account immediately. Knowing what savings strategy is best for you can take time and you can experiment with different spending and saving ratios to see what works best for your business.
When it comes to small business budgeting, mistakes are easy to make when you are busy with the many responsibilities that come with running a company. Sometimes having someone else deal with the finances can help reduce stress and boost your productivity. Allow us to be your helping hand so that you can focus on the parts of running a business that matter to you without having to worry about financial stress. Here at STEPS, we offer small businesses budgeting assistance as well as many other financial management services. You can learn more about our services on our home page or reach out to us on our contact page.
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