Creating a budget is one of the most important steps a business can take to ensure its financial health. But even the best-laid plans can go awry if you’re not careful. An inaccurate budget can lose you money instead of saving it.
Here are three mistakes to avoid when creating your business budget.
Not Budgeting for Maintenance
Every business has costs associated with keeping things running smoothly. Whether it’s maintaining inventory levels, repairing a commercial chiller, or replacing worn-out tools, these expenses can add up quickly.
Neglecting to add this to your budget can put a serious strain on your cash flow.
To do this properly, take a look around your business and make a list of all the potential maintenance expenses you could incur that are specific to your industry. For instance, if you own a restaurant, you might need to budget for things like restocking your supplies, repairing kitchen equipment, and repainting the dining room.
Once you have a good idea of these costs, add a line item to your budget for each one and make sure you set aside enough money each month to cover them.
Under Calculating Taxes
No one likes paying taxes, but they’re a necessary part of doing business. And if you don’t factor them into your budget, you could find yourself in hot water come tax time.
There are several different taxes that businesses are required to pay, including income tax, and property tax. These taxes can vary depending on the type of business you have, your location, and a number of other factors.
For example, if you’re a sole proprietor, you’ll need to pay self-employment tax. And if your business is incorporated, you’ll need to pay corporate income tax.
To make sure you’re budgeting correctly for taxes, consult with a tax advisor or accountant. They’ll be able to help you calculate how much you need to set aside each month to cover your tax bill when it comes due.
Failing to Plan for Slow periods
Even the most successful businesses have slow periods. And if you’re not prepared for them, they can wreak havoc on your budget.
To avoid this, take a look at your sales over the past year and identify any slow periods. Then, plan accordingly by setting aside less money in your budget during these times. This will help ensure you have enough cash on hand to cover your expenses, even when business is slow.
For instance, if you know that sales tend to slow down during the summer months, adjust your budget accordingly. This could mean setting aside less money for marketing and advertising expenses or holding off on hiring new staff until business picks up again.
Creating a budget is an important step for any business, but it’s not always easy. By avoiding these common mistakes, you can set your business up for success.