5 BENEFITS OF CREATING A BUDGET
Your bank and credit card balances give you just a snapshot in time of how your business is doing financially. If they're all you're looking at as you make decisions around purchasing, hiring, selling, etc., then you're playing a guessing game.
Creating a budget enables you to make more informed decisions to track whether your business strategy needs to be adjusted at all.
1. Identify Trends
Whether it's month over month or year over year, as you begin to enter your income and expenses, you'll be able to see trends. These trends could point to uncovering factors that impact your business that you may not currently be aware of and can help drive future strategic decisions.
2. Manage Cash Flow
Ensuring that you have the right amount of money on hand to pay bills is key. A budget gives you insight into the approximate amount of money you'll need each month for your expenses, making your sales targets much easier to set.
3. Reduce Expenses
You'll be able to see your fixed and variable costs and formulate plans to lower them as needed. Whereas fixed costs take long term planning to reduce, variable expenses can be lowered in a shorter time frame and can easily be identified on your budget.
If you're looking for business financing, a lender or investor may ask for projections prior to lending you money or investing in your company. Your budget can help as you piece together those numbers.
5. Setting Prices
Setting and adjusting prices for products or services is never easy. But a budget can help. By knowing all of your costs, you can set your prices based on what's competitive in the market and what you're looking for in terms of profit.