Even though day-to-day operational activities demand much of your attention as a small business owner, you can’t afford to defer budgeting too long, because it will get that much harder the more you delay.
When you sit down to prepare your business budget, you’ll have to decide which kind of budget you’re going to prepare, a capital budget, an operating budget, or a cash budget.
An operating budget covers a period of a week, a month, or an entire year, and it will display all the income and expenses related to your business’s daily operations. On the income side, it would list sales revenue, investment income, and interest income. On the expenses side, you would list things like payroll, legal services, accounting services, equipment maintenance, business insurance, rent, taxes, and loan payments. You can also include non-cash expenses such as amortization and depreciation.
Also known as a cash flow budget, this document depicts all those amounts related to incoming receipts and outgoing payments, as well as the timing of all of these. It helps you manage your money, and is very good at showing whether or not you have sufficient cash reserves to maintain operations, and possibly to fuel new business growth.
A capital budget is a type of small business budget which is not concerned with everyday operating costs, but instead covers those occasional purchases of significant assets. Included in such purchases are things like large amounts of inventory, a new product line, real estate, manufacturing equipment, or possibly entire IT systems. This particular budget helps to plan for the actual impact of such capital expenditures on the cash flow of your business. It can also be very helpful in determining how funds will need to be allocated for such major projects.
Is your small business budget too tight?
If it seems like your budget has been getting tighter and tighter, your small business may simply need an infusion of cash to ease the stress on your cash flow. Contact us at Business Capital Providers, so our financial specialists can discuss some options for funding your small business.