A small business budget is crucial for success.
Budgeting allows you to manage your finances efficiently, track your income and expenses, and make informed decisions about the future of your business. However, we all know it can be quite challenging, especially if you’re running a small online business with limited resources and working alone or in a small team. But it is possible. Read on to learn how to successfully manage your small business expenses, especially if you run an ecommerce store!
Understand your income and expenses
The first step in creating an effective budget is to understand your income and expenses. You need to know how much money is coming in and how much is going out. Start by listing all your expenses. This can be anything from your monthly fee for your business phone account, monthly accounting platform subscription to product labels – literally anything! Then review your bank statements, invoices and receipts. This will give you a clear idea of your income and expenses.
Use accounting software to track your expenses
Tracking your expenses is essential for effective budgeting. It allows you to monitor your spending, identify what is and isn’t necessary, and make informed decisions about your business.
There are many tools available to help you track your expenses, including accounting software, spreadsheets and mobile apps. To help you stay on track and avoid overspending, make it a habit to review your expenses regularly.
Using Microsoft Excel or Google Sheets to manage and plan a budget for your small business offers numerous benefits. You can work off your own, or pre-designed budget templates that align with your specific goals – whether it’s tracking expenses and limiting expenditure, forecasting revenue or monitoring cash flow.
MYOB Essentials and Xero are more advanced variations of accounting software, which can be integrated into your Little Big Shop. Both platforms are accounting platforms that provide a user-friendly interface and a wide range of functions. Integrate your Little Big Shop with either platform to easily organise and track your orders and invoicing. This makes it easy to manage your online sales all in one place.
As you can see, using accounting software such as MYOB Essentials and Xero are great in helping you to manage your finances, but you should also do the following:
Plan for unexpected expenses
No matter how well you plan, unexpected expenses can always arise. One example is the cost of a raw material rising. It’s important to have a contingency plan in place to deal with these expenses. This might involve setting aside a portion of your budget for emergencies to ensure you manage your small business budget.
Set realistic goals
Once you have a clear idea of your income and expenses, set realistic goals for your business. This will help you focus on what’s important and avoid overspending. Your goals should be specific, measurable, achievable, relevant and time-bound (SMART).
For example, if your goal is to increase your revenue by 20% in the next six months, you need to have a plan in place to achieve that goal. This might involve increasing your marketing efforts, improving your product offerings, or exploring new revenue streams.
Prioritise your spending
When you’re on a limited budget, it’s important to prioritise your spending. Focus on essential expenses first, such as rent, utilities and inventory. Then, allocate funds for things you view as non-essentials.
One way to prioritise your spending is to use the 80/20 rule. This rule states that 80% of your revenue comes from 20% of your customers or products. Focus on the 20% that generates the most revenue and allocate your resources accordingly.
Review your budget regularly
Finally, it’s important to review your budget regularly. This will help you identify any areas where you need to adjust your spending or make changes to your goals. Review your budget at least once a month and adjust as needed.
In conclusion, budgeting is essential for the success of any small business. By understanding your finances, and integrating your Little Big Shop with accounting software like MYOB Essentials and Xero, you can budget effectively and lead your small online business into the right direction!
