A simple budgeting system for your new home business will help you project and track of your cash flow. A basic budget for your business must list both income and expenses. When you start your home business, you will have some one-time costs that you must pay to set up shop. Running your business will require other expenses that you should be able to anticipate. To keep your home business healthy, you must plan how to pay these expenses, using your initial investment and the income that your business generates.
Estimate Expenses and Project Earnings
Budgeting requires that you estimate your expenses, then compare your projections against your actual expenses. Calculate your startup costs first. These items may include licenses, communication tools like business cards, brochures, a separate telephone line and equipment dedicated to providing your service or making your product. You should include your estimated annual costs in your budget. Renewing a business license, marketing campaigns, federal, state and local taxes, as well as insurance, if required, are costs that most home businesses pay only once per year.
Finally, your home business budget should project your monthly or quarterly earnings. Depending on whether you have startup funds or you must generate income immediately, you will also need to draft a plan for meeting expenses on a monthly or quarterly schedule. The difference between your projected income and all of your expenses is your business profit.
Create a Simple Budget Spreadsheet
Home business budgeting does not require elaborate software. It is easy to create a simple budgeting system for your new home business in a spreadsheet like Excel. The free Open Office suite also has a spreadsheet that will let you get started without spending money. The most useful budget for a home business is easy to use. Instead of starting from scratch, try setting up your budgeting system by using a template that has been designed for the spreadsheet program that you chose. A Cash Flow template provides new home businesses with quick entry for standard business expenses and a great way to get a capsule summary of your profit.
Spreadsheets are versatile, so you can use the data in your initial cash flow budget to build other worksheets that help you analyze your business finances. If you are using Excel, you will be able to create additional worksheets like a Break Even Analysis and Quarterly Self-Employment Tax estimates. Sales Reports and detailed Expense Reports will also help you enhance your understanding of your projected budget totals and your actual experience. You can link these worksheets to your basic budget, so that when actual data becomes available, as opposed to estimates, you can refine your business budget to reflect your experience.
Align Your Budget With Your Business Plan
Your business plan should guide you when you set up your home business budget. Keep it handy so that you can be sure that you have included the costs for marketing, promotion, supplies and equipment, as well as the projected cost for producing your goods (if applicable) or services. Once you have setup your initial budget and any additional worksheets, use your business plan to map out the growth of your home business.
The advantage of having your business plan and your budget closely aligned is that if you experience exceptional success earlier than anticipated, you will be ready to take advantage of opportunities that help your business grow, without wondering how they might affect your bottom line.