If you operate a small business, you need to understand its financial situation at any given time. That will help you figure out if your business is profitable or is operating in the red so you can make informed decisions.
Income
Your budget should include all the income your business earns from all sources each month. That may include payments for products that are sold on a monthly basis, regular fees that customers pay for services, fees for one-time projects, payments for educational programs your business offers, fees for subscriptions, and any other sources of income. The sum will be your company’s total monthly income.
Fixed and Variable Expenses
Some of your company’s expenses will be fixed. For example, your rent and loan payments for business vehicles will be the same amounts each month. The sums you pay for employee salaries should be consistent from month to month, assuming the size of your workforce remains constant.
If your workers receive bonuses, those costs will vary from month to month. Other expenses, such as bills for utilities, will vary depending on how much your company uses. If some of your employees travel for business reasons, those expenses will change each month.
One-Time Expenses
Your small business may incur some expenses only once or occasionally. For instance, you may have to replace outdated computer equipment or buy a new table and chairs for a conference room. If you know that those purchases will be necessary for the future, you can estimate how much they will cost and work them into your budget so that you won’t have to figure out how to handle a large expense all at once.
You should also designate money to cover unforeseen expenses. For example, equipment may become damaged and may need to be replaced. Setting aside funds for surprises will help you be prepared to handle bills that you weren’t expecting.
Get Help with Your Company’s Budget
Bookkeeping is complex. You may be unsure of how to record certain expenses in a budget and how to calculate your company’s profit and loss.
DOAAR can help. We have a team of professional accountants who can go over things with you and make sure that all relevant income and expenses are accounted for. That will help you gain an accurate understanding of your company’s financial position. Once you have that information, you will be able to make decisions that will support your company’s long-term growth. Contact us today to learn more.