Introduction:
Small businesses comprise 99.9% of businesses in the US. In 2024, 47% of those businesses were considered profitable, while 17% were break even. That means 35% of small businesses actually lost money this past year. One important cornerstone of observing your business’s financial health is creating and adhering to a budget.
What is Budgeting?
Budgeting is the amount of money that is available for, required for, or assigned to a particular purpose. Many businesses create a budget each year. The goal is to keep your spending under the budgeted amount.
Financial Benefits of Budgeting
There are several financial benefits to having a budget. Part of creating a budget should be earmarking money to put into savings in case of emergencies. Sometimes large surprise business expenses come up and it’s helpful to have a rainy day fund. Having emergency savings can help prevent you from having to take out a small business loan. However, if you do have to take out a loan, budgeting can help you pay off debt faster and save money on interest. Budgeting can also improve your credit score by helping you avoid late payments, saving you money on late payments and fees.
Emotional and Lifestyle Benefits
Budgeting can benefit you emotionally and improve your lifestyle. By having a budget, you can reduce stress by providing financial clarity. It can reduce anxiety by letting you know where your money goes and plan on how to control expenses. It can also empower you to make informed decisions and align your spending with your business and personal goals. This can help you take control of your future by saving for retirement and improve your quality of life by helping save for vacations.
Budgeting and Taxes
Budgeting can help you track expenses for your taxes. It can provide you with clarity on taxable income and deductions and prevent surprises with tax payments. You can also budget quarterly tax payments to reduce interest and penalties. Furthermore you can include budgeting for tax beneficial investments, such as retirement savings and financial instruments.
Conclusion:
Budgeting is usually a very personal process for most small business owners because only you can know what you need to spend money on in order to run your business. However, it can often be difficult for small business owners to know where to start. That’s why we have started offering a budgeting service included in our Advisory Service Packages. The end of the year is the best time to create a budget, so please reach out to us if you would like to know more about this service or schedule a consultation.
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