Many of us take the leap or stumble into home businesses while we are working more conventional jobs, or because life just tends to push us in the direction of running our own businesses. We may not have a lot of experience with the “administrative” side of business when we hang up our shingles. One area that can get overlooked is actually developing an expense budget for the year (whether you operate on a fiscal or calendar year) and making a plan for how you will take care of the cost of conducting your business.
Coming up with an expense budget for the coming year can be helpful in terms of managing your business finances and setting a more concrete plan for the year’s operations. If you have kept receipts and notes from the previous year, this can be a good place to start in trying to craft a forecast of what you expect for the coming year. You’ll want to be as extensive and realistic as possible.
Business expenses to budget will depend on the type of business you operate. If you have inventory or product that you need to purchase upfront, you may already be used to thinking in terms of budgeting. But, supplies (computer, fax machine, paper, envelopes, etc.), postage, services (phone, internet, copies,), and even transportation and travel are all business expenses that should be budgeted. If you do entertaining or lunches or parties for your business, be sure to budget these in as well.
The most useful budget will be one that fits your business and your personal working style. Often, people start with figuring out what the basic expenses are each month, then add in the less frequent expenses and sketch out an entire calendar year or twelve months of projected expenses. You will then have an overall picture for the entire year. If you are able to project your income as well, this can help you decide where larger, less regular expenses (such as the purchase of a new computer) would best fit into your year’s plan.
As you proceed through the year, you will be able to look at your expense budget to see if you are on target or in danger of “going over budget.” You’ll then be able to make adjustments–either to expenses or boost your income to cover the additional expense. Developing an expense budget for your home business just makes sense.