15760 Ventura Blvd, Suite 610 Encino, CA 91436
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15760 Ventura Blvd, Suite 610 Encino, CA 91436
FREE CONSULTATION818-436-2775
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Personal, Affordable Payroll Services, Bookkeeping, and Tax Processing for Small Business throughout Los Angeles County.

5 Easy Steps to Small Business Budgeting

Have you heard the saying fail to plan, plan to fail? Well, when it comes to small business budgeting and accounting this couldn’t be truer. Accounting and finances aren’t the most fun and exciting parts of entrepreneurship, but they are critical if you want to run a viable and profitable business in Los Angeles.

Small business budgeting doesn’t have to be tough. There are plenty of tools and templates available from reputable online sources that will help you to get and stay organized. Figuring out what to fill into those templates is the potentially tricky part. That’s why you should follow our 5 simple steps to small business budgeting.

1. Estimate (realistic) sales and profits

Your first step is to estimate your sales for the forthcoming year. If you have figures from previous years, it will help, but if not, this isn’t impossible. Your sales projections are targets, just like your anticipated profits so they should be realistic, but challenging.

2. Calculate your operating expenses

You need to figure out what it costs you to do business. These items may include:

  • Rent
  • Utilities
  • Licenses
  • Taxes
  • Costs of goods
  • Salaries and wages

If you have records from previous years, they will help to guide this small business budgeting step. If you haven’t created a budget before, you might need to brainstorm and list out your business expenses.

3. Figure out your gross profit margin

This is the easy part. You determine your gross profit margin by subtracting your operating costs from your projected sales. You might be surprised by how much your operating costs eat into your profits. That’s okay because, in your next step, you review.

4. Re-evaluate your figures and adjust to meet your profit targets

During this step, you review your costs to see if you can trim any unnecessary expenses and re-evaluate your sales targets to see if they can be more challenging. Remember, a challenge is motivating, but it’s foolish to project unrealistically high sales to make your estimated gross profit margin bigger.

5. Review monthly and quarterly

So now you have your annual budget. Unfortunately, it’s not time to put it away until next year. You’ll need to review your budget monthly and track your progress against your targets and adjust accordingly. You may try to reduce your costs or there may be months that you expect to win more sales. For example, if you operate a business with seasonal highs and lows, you need to make sure that you’re making and saving enough to cover your costs through the lean months.

For more help managing your small business finances, contact Accounting Taxes Payroll Partners today at 818-436-2775.