The first budget you create for your consulting business is not a permanent one. You'll change it over time as you get to know your business better and work out all the kinks. Some entrepreneurs try to "wing it" and spend money based on gut feelings, or the latest trend they've read about on the Internet. That's the road to failure or bankruptcy that you want to avoid from the start. You can with a well thought out budget.
What Happens When You Don't Maintain a Budget
Creating a budget that you don't actually follow is a waste of time. If you take the time to write one out, make it a point to maintain it. Post your budget in places where you pay bills or make purchases, such as near your home office computer or in your purse. When you make a payment or buy something, enter it in Quickbooks or another accounting software that you use for your business. Here's what can happen to your consulting business if you don't maintain a budget:
- Lose money to bank overdraft fees
- Take on credit card debt to compensate for not maintaining a budget
- Owe debts to vendors and suppliers because you don't have money to pay bills due
- Borrow money from personal savings, which can be detrimental to your family if there's an emergency
- Damage client's business because you're unable to deliver consulting services as promised due to lack of money
- Close for business when you run out of money due to poor financial planning
The impact of not maintaining a budget for your consulting business extends far beyond you. It can negatively impact your family, clients and the other businesses you have relationships with. You have to take budgeting seriously.
How to Create One
The best way to create a budget for your consulting business is to use a software program. A business accounting software program often has budget templates for common businesses, and you don't have to figure out excel spreadsheets or manually create a budget. A consulting business is most likely included in one of those templates. You can delete or add categories that pertain to your circumstances. Some budget categories for your consulting business to include are:
- Income from individuals
- Income from companies
- Web hosting
- Internet Access
- AWeber or Constant Contact (for email marketing campaigns)
- Freelance writer fees (for articles or blog posts to website)
- Web designer
- Paypal fees
- Workbooks (for clients, you can include in consulting fees)
It's also easy to generate a budget comparison chart to see where you're overspending, or categories that you can eliminate because you don't spend in those areas. Make sure you keep up with recording all of your income and expenses at least once a week or as soon as there's a transaction.
Once you have the right mindset about the importance of maintaining a budget, you will see significant improvements in the way your consulting business runs. Changing your mind about budgeting is the hard part.