Even if it is simple, it is critical to sit down and spend some time thinking about how much you have coming in and what is going out. When I started doing this I started doubling my revenues each year for the first 3 years. The more you do that the harder it becomes to do:)
How? It put my focus very specifically on what I had to do to make sure I had the bills covered when I started my business. I was renting and apartment and charging $40/hour. After sitting down and looking at my expenses I knew what I needed to make in order to be comfortable. It gave me a target to shoot for and when I reached that target I started thinking about how to raise the bar. Eventually I realized I needed to raise my rates and my time was in enough demand to justify it. If I hadn’t done a budget I don’t honestly know if I would have succeeded. I wouldn’t have known what to charge. When I bought a home, the budget became that much more important. Now I had 2, one personal and one for business.
My budget is done in excel (of course) but is based on reports I created in QuickBooks. This makes it very easy to compare and update. I just run my reports in QuickBooks and export them. I spend 5 minutes comparing the chart of accounts to accommodate any changes by updating the budget’s line items. Then it’s a simple copy and paste, and of course I carve out the last month to run a comparison and variance report. This puts my attention on anything that deviates substantially from budgeted to actual and forces me to pay attention heading off many potential problems long before they become problems. I review the budgets line by line each month. You would be amazed if you aren’t already doing this at what a difference this makes and how much valuable information I get out of this.
What do you do for a budget? I would love to hear your ideas, and I am always happy to answer relevant questions.
