In this lesson, you will learn the importance of budgeting for your business to effectively manage your finances, plan for future expenses, and achieve your financial goals. You’ll be introduced to the concept of a business budget specifically focusing on expenses.
Lesson 1: Understanding Business Expenses
Business expenses are the costs incurred in the operation of a business to generate revenue. There are two categories of business business expenses, fixed, and variable. Fixed expenses are things like rent payments business insurance, Internet, bills, and phone bills, and furniture, fixtures, and equipment financing.
Variable expenses fluctuate with the cost of doing business. Examples include utilities, inventory, and marketing costs.
Lesson 2: Identifying and Categorizing Expenses
It’s important to identify and categorize all of your business expenses. Some common examples of business expenses include:
(A) Overhead Expenses
(rent, utilities, and business insurance)
(B) Cost of Goods Sold (COGS)
(raw materials to create your inventory)
(C) Operating Expenses (marketing, employee salaries, office supplies)
By reviewing your past financial records, such as your bank statements and invoices, you can identify these recurring expenses, you can use an accounting software program to track and label them inside of your accounting software.
Lesson 3: Estimating Expenses
Now let’s review the process of estimating expenses for each category.
For fixed expenses, determine the monthly or annual cost of these items based on contracts or agreements that are active.
For variable expenses, you can estimate your monthly liabilities based on historical data, industry benchmarks, or market research.
When estimating your variable expenses, it is important to be realistic and conservative in your estimates so that you’re not short at the end of the month.
Lesson 4: Allocating Funds
It’s important to allocate funds within your budget to cover all of your expenses. You should prioritize essential expenses while considering discretionary spending. Be sure to set aside funds for unexpected or emergency expenses (i.e. a contingency fund).
Lesson 5: Monitoring and Adjusting
Creating a budget is an iterative process that requires ongoing monitoring and adjusting. One method that you can use to track your expenses and compare your actual spending to your estimated budget is by using either accounting software such as QuickBooks or using spreadsheets such as Excel or Google sheets.
You should review your budget on a daily, weekly, and monthly basis to make adjustments as needed based on changes in your business operations, revenue, and expenses.
In summary, you should create a basic business budget that includes identifying, recurring expenses, categorizing your expenses, as fixed or variable, estimating a budget for your expenses, and allocating revenue to cover all of your expenses.
It is important to budget for your business to achieve financial stability and success. I encourage you to apply these budgeting principles that you’ve learned in this lesson to your own business ventures and future entrepreneurial endeavors.
Join us next week for module three, lesson three, where we will review examples of fixed and variable business expenses.
And don’t forget, “go out there and amplify your message!”
The Entrefluencer Club 