No matter the industry, the field, the number of employees, or any other factors, businesses require funds to be operational. Sometimes, those funds come in the form of business loans and credit cards loans and credit cards, and this is where one wonders: “how many credit cards should I have?” Big businesses and small businesses alike have to understand how to make a budget to be sure that the bills are paid and the business keeps running.
Creating a Business Budget
Making a business budget is a little different- maybe a lot different- than a household or personal budget. When you are setting up a personal budget, you have an idea of what is coming in and what needs to go out. You know how much you are going to make, or at least how much you should make on an average month. You also know about how much your bills are going to run. It is easy to, if nothing else, estimate a household budget.
A business budget will probably require a lot more guessing. Depending on the business you are running, you may have an idea of how many clients you will work for or you may have no clue what kind of sales you will make. You might also find yourself in need of equipment that you were not expecting. In this case, it is best to overestimate your expenses and underestimate your earnings.
In fact, it is probably safest to figure out what the lowest amount you make in a month and budget around that. Still, though, have a plan for any extra that comes in, even if it just goes into a business savings account for future expenses.
Set Goals and Priorities
If you want to make a budget that you can follow, you need to have goals on it that you actually want to meet. This pertains to both business and personal budgets, though the goals on each will differ.
For instance, a personal goal may be that you want to buy a house while a business goal may be that you want to expand operations into other states. Either way, your budget needs to work toward those goals and you need to know how credit cards and business loans can either hurt or hinder meeting them.
Possibilities and Risks of Business Loans and Credit Cards
Both business loans and credit cards can work wonders for your business, but they can just as easily destroy your business. When you make your payments on time every month, you build your business’s credit, and credit is something many businesses run off of completely. It may not always be credit with a lending institution, but suppliers and other working partnerships, as well.
It is important to keep your business credit favorable so that you can obtain what you need to run your business when you need it. Think about it- what if you a piece of equipment that is vital to running your business suddenly breaks down. If you have good credit, you can probably get it replaced quickly and get back to work.
If you do not, there is a good chance that no one is going to want to help you out of fear that they will not be repaid. Now, you cannot even run your business because you do not have the equipment. Even when it is hard to do, it is always best to repay any debts so you can continue to run your operation smoothly.
Try Not to Carry a Balance
When it comes to loans, as long as you make your payments, your balance should consistently decrease. It is not the same with credit cards as these companies only require a minimum payment each month. That minimum payment is going to keep you in debt.
Every month, try to pay the full balance due and try to pay it before the interest gets added. The longer you carry a balance, the more you pay over time. At the very least, be sure you pay more than the minimum payment.
Final Thoughts
Always be deliberate in the financial decisions you make for your business. Allowing things to just “happen” is not a good strategy, especially if you want to keep your business and actually move forward. Learn all you can about budgeting and be sure to repay any business debt that you acquire.
There are plenty of business budget tools out there to help you stay on track, including FreshBooks, Quickbooks, and Xero.
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Interesting related article: “What is a Budget?“