What is a business budget?
Running a successful business requires proactive financial management, careful planning, and effective decision-making. At Storen Financial, we know that a key tool in achieving your business goals is the development of a well-structured budget.
A budget serves as a financial roadmap, guiding your business toward profitability, growth, and long-term sustainability. Simply put, a budget is a spending plan for your business based on your income and expenses. For example, a budget might include:
- Estimated revenue – The projected amount your business will earn
- Cash flow – The money moving in and out of your business
- Profit – The money left over after you’ve paid all your expenses
- Fixed costs – Rent, payroll, utilities, insurance, and loan repayments
- Variable costs – Raw materials, direct labor, production supplies, commissions, delivery costs
- One-off costs – Startup costs such as hiring a logo designer, paying for permits, licenses for major equipment, and occasional one-time purchases for major equipment
5 Benefits of the Business Budget
Over the years, we have seen that developing a budget for your business can positively impact your operations in 5 key ways…
1. Set clear financial goals
A budget enables you to establish clear financial goals by defining and strategically working towards your revenue goals, expense limits, profitability objectives, and potential areas of improvement.
2. Forecast and make decisions
A budget allows you to anticipate potential challenges. You can identify potential cash flow gaps, manage working capital effectively, and make informed decisions about resource allocation. This will provide a framework for proactive decision making, reducing risks, and maximizing opportunities.
3. Manage cash flow
A budget plays a critical role in managing cash flow. When you accurately estimate your income and expenses, you can anticipate any cash surplus or deficit and take appropriate measures to ensure adequate liquidity. This will enhance your ability to meet financial obligations, seize growth opportunities, and weather economic downturns.
4. Allocate Resources
A budget helps you control costs for your business by tracking and analyzing spending patterns and implementing cost-cutting measures where necessary. This facilitates better accountability and transparency within your organization, as it helps monitor departmental budgets and encourages responsible spending.
5. Evaluate Performance
A budget acts like a benchmark against which you can evaluate your business’ financial performance. By regularly comparing actual results with the budgeted figures, you can identify variations, trends, and potential areas of concern. This analysis enables you to take corrective actions promptly, revise strategies, and ensure that your business remains on track.
Overall, budgeting can give your business clarity, control, and direction. Without it, you run the risk of overspending and underperforming, and this can ultimately lead to business closure. With our Business Services Team’s extensive expertise, we partner with you to develop a comprehensive budget tailored to your unique needs.
Beyond budget maintenance, our team also specializes in everything from monthly compliance needs to Business Advisory Services that concentrate on a forward-thinking approach to business planning. Our ultimate goal is to cultivate long-term, rewarding relationships that help you and your company succeed.
Have questions about building a business budget? Or want to schedule a consultation? Feel free to contact our Business Services Team. Click here for contact information. Or click here to learn more about our Business Services.
Want to learn more?
Here are a few more resources to help answer your questions…
How to Create a Budget for Your Business – Bank of America
How to Create a Business Budget for Your Small Business – NerdWallet
7 Reasons Why Budgeting is Vital for Successful Businesses – Indeed
Blog by Erika Lewis – Business Services Director
Learn more about Erika and the rest of the Storen Financial team here.