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Better Budgeting: What to Include
Creating a budget is an indispensable planning exercise when starting a new small business.

If you’re in the first year of business, tracking every last detail and unexpected expense can offer great insights. If you’ve been in business for years, even basic tracking is great for making sure your projected budget is a realistic reflection of your actual expenditures.


Although you may have a big picture understanding of your projected revenue and expenses, it’s important to get the details down on paper or a spreadsheet. This will help you plan for the future, make important decisions and manage your cash flow. And if you are seeking the support of third-party financiers, it’s absolutely necessary to have a thorough financial plan to share.


What to include in your budget


You can set up a budget using a basic spreadsheet program, like Microsoft® Excel or Google Docs. The most important sections to include are revenue, capital expenses and operating expenses.


Revenue is any money your business brings in or earns. It’s important to track revenue and income to understand how much you are making. It’s also useful for helping you measure and benchmark performance against your sales goals.


Capital expenses are costs incurred to prepare the business for operation. For example, a new dental office may have to invest equipment or a contractor might need a new truck. These are infrequent purchases, often happening only once.


Operating expenses. This refers to all recurring expenses incurred as a result of operating the business. These can include utilities, rent, insurance, supplies and payroll.


Tips on creating a budget


Review past expenses. Often, the best way to start budgeting is to review your existing financial statements to get a realistic view of your current financial landscape.


Specify a timeframe. Although many companies will create a financial plan for the fiscal year, creating a monthly budget can be extremely helpful to stay on track. One strategy that can help small business owners stick to their monthly budget is using a charge card which, unlike credit cards, requires users to pay their balance in full on a monthly basis.


Research start-up costs. If you are starting a new business and don’t have a previous budget to work from, look into typical costs and trends associated with businesses in your industry to help you estimate average costs.


Estimate recurring expenses realistically. Some operating expenses may vary over the course of a year. For example, your air conditioning bill will be higher in the summer months than the winter. When you are adding this expense into your budget, consider calculating a yearly average.


How to get the most value out of your budget


Now that you’ve created a budget, here are a few tips to help you get the most value out of it:


Update it frequently. Many businesses will create a budget, then put it away and basically forget about it until the next year. You’ll get the most information out of it if you refer back to and update it on a monthly basis.


Compare your estimated expenses with actual spending habits. Assessing how much you actually spent compared to your projected amounts is a great learning experience. Carefully scrutinize any discrepancies – the goal is to uncover the reason why you went over- or under-budget so dramatically. Were there seasonal sales variations? Did purchasing trends change? Did you need to make some unexpected repairs? Or are there some opportunities to improve your spending efficiency? These types of questions can help you create a better budget for the next year and allow you to take the necessary steps to prepare your business to operate within it.


Take action when you learn something from it. Knowing that you’re overspending on a budget item isn’t very helpful unless you create and execute a plan for bringing spending more in line. It’s true that in some cases you’ll simply need to adjust your budget – after all, a budget is nothing more than an estimate, and estimates aren’t always accurate – but the key is to recognize the areas in which it’s possible to make adjustments that will actually reduce your expenses.


By following these steps, you’ll be well on your way to creating, managing, and benefiting from a business budget!


Want to earn points while sticking to your budget?


Unlike credit cards, charge cards require Cardmembers to pay the balance in full each month, which means they aren’t built for carrying a balance and paying interest – this is an asset when it comes to staying within a budget. Amex Cardmembers also have an easier time tracking expenses (compared to paying by cash/cheque) thanks to online expense management reports. Comparing these reports to the budget you’ve created will help you regularly assess how effectively you’re managing your expenses.


The opinions expressed in this article are those of its individual writer, and do not necessarily state or reflect the views of American Express Canada or Amex Bank of Canada. Third party web sites may have privacy and security policies different from Amex Bank of Canada. Links to other web sites does not imply the endorsement or approval of such web sites.

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