A gym membership to improve your health, a coffee pot to save you money by brewing at home instead of daily trips to Starbucks, or an eco-friendly car that’ll carry you where you need to go and be good to the environment.
These are all expenses that reflect your personal goals and priorities.
But does your small business spending reflect your business goals and priorities?
And if not, what can you do to create and balance a business budget that ensures you’re getting the best return on investment for the money you put into your small business?
3 Steps to Building a Business Budget That Works
1. Know Where Your Money Goes
Before you can make adjustments to your business spending (and thus your business priorities) you need to know where your money is going.
Plug your business finances into an online tool like Outright (we now use Quickbooks for Small Business). Quickbooks requires minimal to no data entry and will give you a visual pie graph of your spending by vendor or by category so you can make determinations at a glance.
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For example, does the office supplies chunk of your spending pie look suspiciously large? It might be time to reevaluate whether you need all those paperclips.
Many banks also offer handy apps so you can access your financial information from your mobile phone or tablet. But even if your bank is a little behind technologically, you can sync your finances with an app like Mint for a snapshot of your finances at a glance.
2. Maximize the Money Coming In
Your second step to getting your spending priorities in order is to ensure that you are actually collecting all the money you are owed. For the less administratively inclined small business owner, simply keeping up with the money coming in (or not coming in) can be a real headache.
It’s easy to lose track of an invoice you sent out by mail or email. Use a time tracking and invoice management tool like Chrometa to keep up with the time you spend working for clients so you can send accurate invoices. With these tools, you can even see at a glance how much money you have outstanding.
And be sure to accept payments the way your customers want to pay: electronically, preferably via credit card. Not only is paying with credit more convenient for your customers, but you also then have record of the payment and the funds hit your bank faster, too.
Check out WePay to invoice and accept payments all in one place. They even have a widget you can embed in your website to allow customers to pay instantly with their credit cards – no sign up required.
3. Examine Your Spending… With a Sharp Knife
I don’t mean literally examine your bank statement with a cutting implement, but be ready to make cuts… and even to plump up spending in some areas.
- Am I spending money in areas that will give me a return on my investment? – Money spent on behind the scenes purchases like cute office supplies and decorations for the home office that no client ever visits could often be better spent elsewhere. Try re-allocating some of those funds to buying advertising or attending networking events with your potential clients.
- Am I paying too much for something that should be free (or very cheap)?– OpenOffice is a free and open source version of the Microsoft Office Suite. Gimp is a robust yet free photo editor that performs many of the functions that small businesses need. WePay can virtually take the place of an expensive merchant account and terminal rental. The bottom line is that with today’s technology many companies are finding a better, cheaper ways to offer business services. Be sure you aren’t paying for something that your competitors are getting for free!
- Where do I need to spend more money?– As crazy as it might sound to the bootstrapping small business owner who’s always watched every penny like a hawk, it may be time to spend more. For example, perhaps buying in bulk could give you the price break you need to make the products you sell on eBay more profitable. Or maybe hiring a contractor to take are of some of your day-to-day tasks could free you up to win more clients. After you’ve cut your spending elsewhere, determine if there’s an expenditure out there that could help your business succeed.
As a small business owner, you have the freedom to change quickly with the times. Following a budget and knowing how you’re spending can mean the difference between soaring ahead of the competition or sinking.
Do you follow a small business budget? How do you keep it in check?
I am blogging on behalf of Visa Business and received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa’s. Visit Visa’s reinvented Facebook Page: Well Sourced by Visa Business. The page offers small business owners a place where they can find educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently. Every month, the page introduces a new theme that focuses on a topic important to a small business owner’s success. For additional tips and advice, and information about Visa’s small business solutions, follow @VisaSmallBiz and visit http://visa.com/business.