Ever gotten that gut wrenching fear in the pit of your belly when you thought of making a budget? Then the odds are good you’ve never cracked a dictionary to find out the correct definition, and worked out how you can use that to your business’s financial advantage.
Want some really good News? Running your business on a budget does not mean downgrading the quality of the things you buy or not purchasing something your business needs to operate. What it does mean, is that you have to figure out how to make enough income to afford the things your business needs and to keep your expenditures under your income.
There’s more good news! The most valuable asset you have is you and your staff, and your income earning potential. If you want a bigger spending budget, then work out how your staff and you can be more productive to earn more money.
A second definition you need know is this: a BUDGET is the amount of income needed for the company to operate, and to reach its goals.
Let’s consider the first part of the definition; how much is needed for you and your business to run. Look at your Profit & Loss Statement to find out how much you spent and add the amount you are carrying on credit cards plus interest. Divide that amount by 52 weeks, and multiply it by 1.036. The result is your weekly budget. That is the amount of money your company has to generate just to operate plus barely keep up with rising prices. That doesn’t include paying accumulating interest on the debt.
More than likely, you have financial goals you also want the business to reach; That’s the second part of the definition. Reaching those goals must get added to your budget as well.
Here is an example: a business owner wants to buy a new piece of equipment 6 months from now that costs $4,000. They divide the cost of the equipment by the 26 weeks they have before the target purchase date and learn they have to set aside $153.85 every week to have the cash for the equipment. This gets added to the budget, meaning the additional amount of income they have to put into the bank every week.
Most importantly, if you, the company owner, want to reach the goal of financial freedom - working because you WANT TO instead of because you HAVE TO — then the most important part of the budget needs to be the wealth building cash you set aside in a savings plan and never touch.
Figure out how much money you would have to have in savings to live without working. Divide that dollar amount by the number of weeks until the time you would like to be financially free. Figure out how to make that much more money each week, and you are truly on the right budget track to achieving financial freedom.
Do you absolutely want to be a millionaire in 20 years? Figure out a way to grow the business’s income enough to put away $961.54 a week in savings for the next 1,040 weeks and you have made it to being a millionaire! The additional interest earnings on top of that will be a a nice add on perk that more than keeps up with the rise in the cost of living every year.
In this day and age of computers this task of budgeting is made so much easier by streamlined and automated Money Management Software, such as shown in this video.. This software can work as a companion to your accounting software for really easy day-to-day operation.
Sandra Simmons, President of Money Management Solutions has years of experience helping company owners and private individuals manage their money to achieve financial independence. To find out about the Money Management Software described in this article, watch the FREE 5-minute demo video on the website www.MoneyMgmtSolutions.com
- Sandra Simmons
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