Budgets exist for a reason. However, they can be difficult to stick to for even the most money-savvy person. When the minuses start piling up and the pluses disappear in your business banking account, it’s time to reevaluate your spending. How can you do that? You’ve already strayed from the established limits, so how can you get back on track? Just because you’ve deviated a bit this month doesn’t mean you can’t start again in the next one. For how to redo your financial plan, check out the tips below:
1. Examine Last Month’s Expenses
Your spending in the next period won’t change if you don’t know where you originally went wrong. The best way to find out is to check your expenses from the previous month. What did you spend the most money on? Which categories surpassed your anticipated limits? Did you use your money frivolously? Once you’ve evaluated what you spent your funds on, you can better determine where you have to cut the excess. Make sure you also look at your cash flow. You need to ensure that enough revenue is coming in to support your expenses. You’ll need to switch up your budget if there isn’t significant.
2. Adjust Categories
Certain costs can end up being more than what you thought they would be. That’s to be expected. However, that doesn’t mean you can carry on as you are. You must compare your predictions to actual banking reports to determine where to adjust. Check out what you’re spending most of your money on and decide whether those were necessary expenses. Were there any categories that had money left over? Were there sections that went way over budget? Take the time to sit down and figure out where you need the most funding. This will help you ensure you meet your budgeting goals.
3. Use Cash Accounting
It may be tempting to add income and subtract expenses immediately before receiving or losing the money. However, accrual accounting is not the best method for a small business. It doesn’t give you an accurate financial statement of what’s in your account. You’ll think you have money to spend even if you haven’t physically received it. Cash-based accounting is your best option. This method only adds payments once you have them and takes away cash once it’s been processed. When you know what you have, you’ll be better able to manage your money.
4. Avoid Credit
It’s easy to just put expenses on your credit card instead of your debit, but you may want to reconsider that decision. All those charges you’re putting on your credit will have to be paid back eventually, and the more you use it, the more debt you’re falling into, LBee pointed out. If you didn’t have room in your budget before, you definitely don’t have any when you accrue all that interest on your purchases. It’s best to stick with the cash accounting method and only use your money to keep yourself in check.
5. Set Money Aside
No matter how well you plan out your budget, something will throw it off. It could be an emergency or an unexpected expense. Either way, it’s getting subtracted from your account. Why not plan for these types of situations in advance? Set money aside for things that are out of your control. Then, you won’t have to rework your entire financial plan to find room for extra purchases. Your budget and stress level will thank you when you’ve already thought ahead.
Personal budgets can be hard enough. Planning for your entire business is a different situation. Your entire company depends on you being able to manage your money efficiently. If you get off track, take the time to set yourself straight for the next period.
Budget Better With First United Bank & Trust
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