5 Smart Monthly Budgeting Habits for Small Business Owners
The existence of small businesses in Indonesia accounts for nearly 68% of income and employment. This is certainly an extraordinary achievement for small businesses that have limited financial conditions. Usually, as a small business owner, managing expenses and placing them wisely is not easy. Therefore, to get a concept of financial intelligence and good financial management in the initial situation of a business that is still unstable, an entrepreneur needs to have a monthly budgeting habit that can start from small things like the following.
Set aside Emergency Funds
In the initial stages of establishing a new business, revenue still often fluctuates so you need a backup plan to compensate for this lack of consistency. It’s important to have an emergency fund to maintain business processes. You may not be able to control unexpected expenses or decrease economic value, but by having some money set aside, you already have a financial buffer if something bad happens and affects business and business finance.
For that, try to set aside expenses between three months and one year for business emergency funds each month. If possible, automate the financial provision process so that you don’t even realize that your money has been set aside. The money that has been set aside can be used not only to add to volatile revenue streams but can also be used to enable companies to have greater opportunity targets.
Add Potential Unexpected Costs
When owning a new business, you tend to have lots of new ideas that are quite innovative, come on suddenly, and require unexpected costs. Planning ahead for an unexpected expense budget is a smart financial secret. Add 20% of the total business budget as an unexpected expense. By having an unexpected budget, you will definitely feel comfortable channeling your creative ideas that come suddenly without having to burden business money.
Create a budget and avoid spending it
This method is a good way to hold yourself accountable if you tend to spend too much company money on personal business-related needs. For example, you can share the following:
- – Rp1,000,000 for office food and snacks.
- – Rp. 2,000,000 for office supplies.
- – Rp.3,000,000 for dinner with clients.
Use this method to plan your monthly budget and then paste it as a guide to stay within parameters related to what you can and cannot spend. If you still find more expenses each month, use this simple budgeting calculator to determine how much will come in, how much will come out, and how much will be spent in the total amount of your expenditure.
Place your focus on reducing that amount each month until you no longer spend more than you carry. Then return to the personal budgeting method, which will help you maintain and improve your spending habits.
Updating Records by Tracking All Transactions
The advantage of owning your own business is that you can wipe out certain expenses when you file taxes. For example, when you have purchased goods that are taxed, then proof of payment of the purchases you have saved will help the company get a tax reduction. To truly benefit from these incentives, you must have documented evidence of these expenses.
Make this part of your monthly routine agenda when making a budget. Follow the practice of recording all transactions that occurred during the previous month. Track and record all transaction data in your accounting software and save receipts digitally. If at any time your business is audited, or there is a problem, you will have all the documents needed as proof.
Proactively Reducing Debt
Debt is a reality for many small business owners, but having too much debt can weigh on business. To avoid this protracted situation, try to proactively and consistently reduce the amount of company debt by making more payments if you have a budget that allows. Don’t wait for the debt to mature. Focus first to pay off the debt with the highest interest rates that can burden your business in the long run.