A budget is very crucial to the success of any individual who is managing a business from home. Making a budget for a home based business can be a pretty intimidating task. People grapple with the idea of where to start and what to include in such a budget. So the easiest way to go about it is to sit down and make lists of all the different accounts and categorize them according to need and priorities.
While making such lists, all you need is a pencil and a paper, but if you own a computer, then computer software or programs such as Microsoft Excel or spreadsheet software can really help you while making lists or gathering data. There are bookkeeping programs available but small home businesses can usually get away with using an Exel sheet.
After adding your totals, you can feed the date into a spreadsheet for organized planning and easy access later on.
The first step to take when establishing your budget is to find out the mandatory costs. Any local, state or country requirements that are necessary for a business licensing or registrations should be included. The fee can vary according to the type of business you are engaged in.
Also, costs should be jotted down in the same category. For example, ‘stationary’ could include:
- business cards
- computer disks
- basically any stationary that you use to run the business
Many times, it feels like the lists are endless when it comes to expenses. Therefore, you should include the expenses that should be covered every month, including each box of paper towels you order and every label you buy for the boxes you ship out. You should never miss out on any expense, even if you think it to be very insignificant as they all add up over a year.
In another category, you should include the expenses that don’t occur on a periodic or monthly basis. An example of this is the annual cost of a web hosting plan or annual insurance payments.
Now you have the option of either dividing all of these expenses up on a monthly basis so as to include them in your monthly budget, or instead you can use a calendar budgeting method where you plot out when each of these items must be ordered and when your bills are due.
In another category, you should account for all earnings that you make.
You could also classify further for the particular types of products that you made profit from so that you know which items you sell more of and which items you make the most from. For instance, if you own clothing boutique at home, then you can make a classification for each individual type of product you provide. You can make separate categories for the different types of clothing you sell, and the proceeds that come from them, such as shirts, pants, scarves etc.
Planning your earnings in this way recognizes the places of your business that are successful and the places are not. Therefore, if you’re profiting more by selling shirts, and not so much by selling pants, then you’ll be able to figure that out. And, thus, you can cut down on making pants and start selling more shirts.
If you do want to take that a step further as mentioned above and know the profit from each item, then you would need to charge the material expense against each but you may just be satisfied with the income level alone for an indication of sales. The bigger your business gets the more you need to break down these types of figures.
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