Top Seven Tips for Budgeting Your Home Business
Let’s be honest, sticking to a budget is not an easy task! However, it is a rather rewarding one when done correctly. By creating a sustainable, yet realistic budget for your business, it allows you to:
- Manage money effectively;
- Determine a plan to meet future objectives;
- Monitor performance; and
- Identify any potential problems before they arise.
So, is reaching your financial goals with ease something that appeals to you? Keep reading for some invaluable tips about how to budget your business from home.
1. Research Costs
Before creating a budget, it is important to understand where your money is currently going, where it needs to go and where cuts need to be made. Your budget should account for both fixed, variable and start-up costs (for new businesses).
- Fixed costs: include rent, utilities, phone/internet, accountant, legal fees, salaries, marketing and communications and technology.
- Variable costs: include the costs of goods sold and labour costs.
- Start-up costs: include business plans, research expenses, borrowing costs, technology, advertising, promotion and employee expenses.
By researching costs thoroughly, you will be able to create a detailed budget that caters for all expenses to operate your business.
2. Create a Contingency Plan
As mentioned above, researching costs is one of the most important steps. To ensure your business is prepared and on track to accomplish goals, it is important to always overestimate your expenses. This will allow for any future contingencies. An added bonus of creating a budget around worst case scenarios, is that there is always a surplus. Although it is not always possible to predict when something will go over budget, it is important to allow for any unforeseen contingencies.
3. Understand Economic and Industry Trends
Whether you’re working at home or not, your business will have to accommodate factors of the economy and the occurrences that happen within its industry. In order to prepare for any economic and industry trends, you should consider the following:
- General industry growth;
- Wider economic growth; and
- Review predictions from reliable industry experts.
4. Review and Update Your Budget
It is important to prioritise a mid-year or quarterly review of your budget. This will help with acquiring a clearer representation of your business finances. It will also allow flexibility to set your business up for success. Your budget should change and evolve in accordance to growth and profit. By reviewing it throughout the year, it could give your business a huge advantage on your competitors.
5. Set Reasonable and Detailed Financial Goals
It is so important to ensure that your budget plan is both realistic and easy enough to adhere to. If you set too many unrealistic goals all at once, you’re going to become very overwhelmed and the chance of succeeding will be very slim. So, when listing all of your goals you want to achieve, ensure you set both short-term and long-term goals – but make sure they’re obtainable!
6. Look for Tax Deductibles
Another factor to keep in mind when running a business from home, is that you might be eligible to claim certain tax deductions.
This could include:
- Occupancy expenses – including mortgage, rent, council rates, land taxes and house insurance premiums.
- Running expenses – including gas and electricity, business phone, decline in value of office equipment and cleaning.
- Vehicle expenses – including travel to and from your home for business purposes.
For more information, read our Top 5 Tax Deductions When Working from Home blog.
7. Don’t Eliminate Marketing from Your Budget
Last, but definitely not least, do not neglect marketing costs from your budget! In order to succeed, you need to advertise your business and create a positive brand image and awareness. Marketing strategies don’t have to cost an arm and leg, but they do need to be part of your business plan in order to be successful.
Remember: The overall concept of a budget is simple – spend less than what you make. By implementing these budgeting tips to your home business, it will ensure that your business is on the road to rapid success.