How to Budget Your Business Expenses for 2015

Having a monthly budget for any business is essential. The sole purpose for having a budget is to measure goals and evaluate spending on advertising, outsourcing, or expansion plans. Having a budget dramatically reduces anxiety. Once the details have been worked out on paper, you will then know every single month where your money is going. There is no longer a need to borrow money from one account to pay another account. Creating a budget can be a little time-consuming, but it is worth it. It's a good idea to have vendor invoices and recent bank statements nearby when starting the process.

1. Identify Spending Categories. Evaluate where your money is going every month. Make a list of monthly expenses and categorize them. This list will vary by business size and type. By using your bank statements and invoices, you can accurately list expenses rather than relying on your memory. 

2. Estimate Expenditures. Now that your expense list is completed, a price will be assigned to each category. How much do you spend every month on a specific item? You may want to start off with expenses that are usually the same every month, such as rent and salaries.

Now, you can start working with expenses that vary from month to month such as utilities, office maintenance, office supplies, and sales commissions. Although you cannot predict future expenses, bills that vary every month can be totaled up for the last 12 months and then divided by 12. This will give you a good estimate for the year. 

There may also be some expenses that accrue infrequently, such as building repairs. These can be some very large expenses, so you may want to start budgeting for them now. For instance, if building maintenance was $3000 last year, you may want to budget the same amount or a little more for the upcoming year.

3. Track Spending. Keeping track of your expenses is not only important for tax purposes, but it also allows you to see where your money is going. Give yourself a couple of hours per week to enter your expenses in your accounting software, for this will make things easier for you in the long run. When paying bills or making large purchases, you may want to think about whether the services or products are necessary. Wanting something is completely different from needing something.

4. A Balanced Budget. Now that all of your numbers are in place, you can begin subtracting your expenses. Make sure that you are not spending more than you earn. If your expenses exceed your income, then you will need to cut back. If you have made every possible cut, then you will need to evaluate your business goals. How many sales are needed to balance the budget? How many additional clients do I need? How many products do I need to sell?

If you input your receipts in your accounting software on a daily basis, you will always be caught up. This is the best way of managing your money. Most of today's accounting programs allow you to budget expenses, so budgeting is not as difficult. By taking these steps, you will be well on your way to having a balanced budget. 

Aubrey Moulton is a writer for Nethosting.com. In her spare time, she loves to go hiking on local Utah trails and spend time reading.