business budget

3 Steps Toward A Better Business Budget

It's amazing -- and scary -- how many businesses operate without a true budget. Cash flow becomes their only barometer, and that often doesn't include an accurate picture of ongoing growth, or the health of a business. One of the most important aspects to budget success is accountability. (That's what we can help you with.)

Before Step 1: You and your budgeting team should schedule a recurring meeting at the beginning or end of each month to discuss the budget, what's going well, what needs to change.  This is the first step towards accountability.

STEP 1:  The Costs You Count On

Once your meetings are set, and you've created a budget document (Excel, Sheets, Quickbooks, etc.), record income and fixed costs which you'll revisit every month. Those two items are crucial to surviving and thriving as a business.

To start, income will largely include sales -- this is why it's important to nail down recurring customers or businesses who utilize your services. If you can lock them in as monthly buyers (subscription service, ongoing help, etc), you will have an easier time calculating revenue streams.

Next, record what fixed costs your business takes on every month. How much money does it take for you to survive? Pay rent? Pay employees? Setting this number will give you a monthly goal to reach, and will help your sales team go out and (hopefully) exceed that number.

STEP 2:  The Variables That ... Vary

You guessed the next item: what you can't depend on from month-to-month.

But that doesn't mean you can't predict! This is where goal setting comes into play. I'm talking about realistic, measurable goals. A large reason you are doing this with other team members is to discuss, set and revisit goals every month. It will also give your business development team tangible numbers to go chase.

Want to hire a new employee in the second quarter? Great, write that expense down. Want to take your team on an end-of-year retreat? Write it down. When is your peak season, and how much more do you think you can make this year than last?

Again, variables pertain to income and expenses you can't rely on from month-to-month, but you can predict ... and isn't business one big prediction?

STEP 3:  Designate a Scribe

If you thought I was only going to mention your budget document once, think again.

It is crucial, as part of your new business budget, to have a place where you or someone on your team records each expense, variable and income source (let such items fill your Y-axis, while each month headlines your X-axis). Here's a few to get started:

Income

    • Product/Service Sales
    • Loans
    • Savings
    • Other

Expenses

    • Rent/Mortgage & Utilities
    • Salaries
    • Bank Fees
    • Web Hosting
    • Insurance

Variables

    • Contractors
    • Advertising
    • Transportation/Travel
    • Office Supplies/Furniture

Those should get you started, but only you will know all the items to include. After you add up your income and subtract your expenses, you'll have an idea of where your business sits. It can be as sobering as it is enlightening.

Now don't waste any more time if you have not created a business budget in the past! Your team will thank you for taking the lead, and it will help position them for success.

If you need help with creating a business budget, contact us today!  Need more help, we can provide Outsourced CFO Services too!  Get started today!

home office

Do You Have a Second Office in the Home?

In today’s virtual world, home offices are becoming the norm. Many professionals are creating a hybrid work environment, splitting time between the office and home office.  Here are some tips when the Second Office in the Home Is a Principal Place of Business:

When possible, you want to claim that your second office in the home qualifies as a principal place of business because this classification

  • gives you the home office deduction, and
  • eliminates commuting from your home to your regular office.

Current law gives you two ways to claim your office in the home as a principal office:

  • First, as a principal office under the rules that the Supreme Court finalized in Soliman
  • Second, as a principal office under the alternative after-Soliman rules, wherein lawmakers added this alternative: “… the term principal place of business includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business”

Test Your Knowledge:  If you have an office downtown where you spend 40 hours a week, can you claim that you have an office in your home that qualifies as a principal office if you spend only 12 hours a week working in the home office? If you said no, you are not alone. But you would also be wrong.

With the administrative or management rule, you can have your principal office in your home with 12 hours of work a week, even when you work at your other office for 40 hours.

Want to find out more?  Contact Emerald Financial Partners today!  We help individuals and businesses with all of your tax requirements!

Source: IRS Home Office Definition

 

Photo Credit:  https://www.steinhafels.com/office

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