Tips for basic budgeting (Credit Corner)
(Editor’s note: Johanna Rohrer is a marketing specialist with MidAtlantic Farm Credit.)
Budgeting is a process of estimating costs and income, while projecting your net profit.
Taking the time to craft a budget allows you to create a roadmap on how you plan to spend your money and what earning potential you plan to achieve.
Simple budgets can be prepared using the following formula: Total projected income (minus) total projected expense (equals) projected net income.
The end of your annual business year is the perfect time to review the status of your budget and make projections for the coming year.
It’s a best management practice to make an annual budget to better understand the overall picture of your finances, while keeping these five tips in mind.
Identify Your Goals
Making realistic and timely projections is important to the overall budget process.
Each year, it’s important to identify the business goals that are important to you, while keeping in mind your projected long-term income and expenses.
The Act of Discipline
Managing your business or personal finances with discipline is a valuable skillset.
Whether you are a business owner or simply managing your personal finances, it’s important to be able to identify both essential needs and wants on your expense list.
Try to ask yourself this question: Is this an expense I can and/or should afford?
Making good decisions and taking an honest approach to your business choices will help you to be more successful in budgeting for the long-term.
Do Your Research
When you prepare your budget, determining your estimated annual income and expense is an important step to the equation.
Having a reliable list of valuable resources can help guide you with items like pricing estimates, market prices, and estimated costs.
This type of research will aid in making informed business decisions, which should help you to maximize projected net income.
Stick To Your Plan
As you move along with your business decisions, you may find yourself challenged by unexpected expenses.
It’s crucial to plan for unexpected costs along the way — they happen. Being proactive by creating a nest-egg of savings is a great best management practice.
This business strategy can help prepare your business and family for the unexpected.
Review Your Plan Continuously
Make time throughout the year to review your plan, where you stand according to your budget, and make adjustments for items that have changed.
Pricing can change — future forecasting and interruptions can force you to evaluate your business decisions.
Don’t just focus on the beginning and the end, manage it continuously.
A good financial manager will monitor their finances throughout the entire year.
Remember, crafting your personal or business budget for the coming year can be a valuable business management tool to prepare you for your future goals.
We know the thought of starting on this may be overwhelming, but we can help!
If you have any questions with your budget, or are ready to move forward with your business or operation, give us a call at 888-339-3334.