Creating a business budget should be something on any business’s to-do list. Budgets are simple tools that can help you learn where your money goes each month and what kind of sales goals you should set on a monthly basis. There are plenty of templates, tools, and experts that can help make this task easier for the first-time budgeter. Keep reading to learn more about how to start a retail business budget.
1. Use a Template
If this is your first time creating a budget, you may want to use a business budget template in order to get a better idea of how the ideal budget should look and feel. These helpful tools are readily available online, and most are free to download and use. The template will map out things like your revenue stream, fixed and variable expenses, and more; so you can spend less time designing your own template and more time budgeting.
Using a budget can also help keep you focused on the task at hand since you’ll have a reference point to start from. Sometimes seeing things laid out in front of you is a little more motivating than having to create something out of thin air.
If you have Microsoft Word, you can find dozens of templates for budgets, calendars, and more. This is an incredibly useful tool for any business, as you can create all manner of visual designs and spreadsheets with Microsoft Excel.
2. Examine Your Revenue
Once you’ve got your template made or downloaded, it’s time to start filling it up with the important stuff. Let’s start with your revenue. How much money does your store bring in on a monthly basis? This will be your gross revenue or pre-expenses revenue. You’ll want to tally up any and all income sources; from subscriptions to online sales to in-store sales.
Use a POS system to collect and store this information quickly and securely. Many modern POS systems are also equipped with analytics tools, so you can print off charts and graphs loaded with important information on sales numbers and trends. You can even go back to previous months or even years to compare YTD or MTD numbers.
Ditch your old method of tracking sales for a modern POS system. Not only will you be able to process more payment methods and track sales, but you can create customer profiles and even track your inventory in a more efficient and accurate way than with proprietary software.
3. Identify Your Fixed and Variable Expenses
Now that you know how much money your store brings in every month, it’s time to add up your expenses and subtract them from your gross revenue. This will provide you with your net revenue, giving you a better idea of how much money you actually have leftover once your expenses are accounted for.
It’s important to distinguish between fixed and variable expenses when creating your budget. Your fixed expenses are things like rent that do no change month-to-month. These expenses will be subtracted directly from your gross revenue.
Variable expenses refer to things like utility bills, which don’t have a fixed dollar amount attributed to them. These expenses should also be factored out of your gross revenue; but should also be given an estimated maximum that you ideally will never go above. This way, you can plan for these expenses as if they were fixed numbers while providing a budget for them.
4. Create An Emergency Fund
When unexpected expenses arise, you want your business to be able to address them without going bankrupt. Anything can happen; a robbery, a fire, a natural disaster, etc. You might even have a huge storm that knocks out the power lines, and you lose business for a few days. Whatever the case may be, having extra funds available to cover the unforeseen costs is a crucial component to creating an effective budget.
Put your emergency fund in a place where you won’t be tempted to spend it; perhaps another bank account entirely at a different branch. This should be allocated for emergencies only. Keeping the emergency fund out of sight will keep it out of mind and reduce the temptation to dip into it for variable expenses or other less important reasons.
5. Hire a Professional
Financial advisors are ready to help you create a great budget for your business. This financial expertise is invaluable when you’re trying to create a working plan for your business, especially if finances are not your strong point. Let’s be honest, no one person can do everything, so if you feel you’re struggling with the financial responsibilities of your business, don’t be afraid to hire some help.
A simple internet search can grant you access to dozens of financial advisors in your area. If you’re in San Jose, read this list of the best financial advisors in San Jose to get a better idea of who will serve your business the best.
A well-crafted budget can help take your business to new financial heights by reducing expenses and providing you with an in-depth look at how your store generates and spends its money. If you’re unsure how to start, you can always hire some help or even download a template to begin creating the perfect budget for you. Don’t underestimate the power of a great budget to completely overhaul your business’s financial goals and processes.