As a business owner, you should understand the importance of a budget. Your company likely won’t last long without one. However, creating and keeping your budget can be challenging, especially when you have unexpected expenses or revenue volatility. Therefore, these are a few budgeting tips you may consider.

Build a Spreadsheet

Your first task should be writing down all your current bills. Include your cost of goods sold, utilities, rent, payroll, taxes, etc. Find every expense you currently have and any you expect in the future. For example, if you expect your growth to require additional equipment, add in your expected lease or loan payment for that equipment. Don’t forget to include your vendor costs.

Track your revenues for several months or years and find your average. Add these into a spreadsheet that you can view easily and make changes to quickly. This spreadsheet is the basis of your budget, so keep it handy. You can also test budgeting software tools that make the process easier.

Research Your Industry

Most industries have expected cost and revenue calculations. See if you can find businesses that have a similar size and structure and review their costs. Do you have higher, lower, or similar expenses? If your costs are higher, find out why. Where are other companies saving money?

At times, small companies may not receive the same credit terms as larger organizations. Therefore, you may have to review your vendor credit terms and negotiate better contracts. Also, take advantage of early payment discounts or other beneficial payment terms. Review all your loans. If you have established better business credit, your financier may allow you to refinance at lower interest rates or with better terms.

If your costs are lower, you may have an unexpected competitive advantage you can exploit. Don’t be afraid to add a little slack for unexpected expenses or price increases. Your budget does not have to mirror others in your industry, but it shouldn’t be significantly higher.

Review Your Budget Frequently

Understand that your budget is never set in stone. Things will change, and you will have to adapt. Therefore, you should review your budget more than once per year. Watch for market fluctuations and review your numbers each month so you can plan.

Once you have created your budget, its maintenance should take much less time every month. Although budgeting may seem overwhelming and tedious, it can save your company and set you up for success.