Simplify Your Monthly Bills Template for Businesses

Monthly bills template for businesses

you can't manage a small business without a budget it's impossible i have clients that make six figures or seven figures per year in sales but have nothing left to pay themselves for example this is the p l of one of my clients they were making over a half million dollars in sales per year but was operating at a steep operating loss within six months we created a budget held her accountable for it and flipped that operating loss completely around as a result they just had their highest profit margin ever i'm on a mission to help you do the exact same hi my name is sherman with life accounting a full service accounting firm that helps small businesses grow and manage their finances today i'm going to simplify small business budgeting and help you get started by the end of this episode i promise you will have a clear understanding of where to start with your budget and how to get started in the process as a licensed cpa and founder of multiple companies i'm going to show you how we create budgets for businesses we own and for our client if you can do me a favor by clicking the like button below if this video helps you in any capacity and be sure to subscribe to our channel so you don't miss out on other videos on how to manage your business finances okay so let's jump right into it i'll be honest it literally hurts me to my core to see people build very successful businesses pay their employees and vendors and aren't even able to pay themselves what they deserve even worse sometimes these businesses are not able to pay their expenses employees or debt payments and they spiral out of business as a result i'm being honest i've seen it and i don't want another business to suffer like this again look i know you're probably like budgeting accounting oh no not this stuff again i get it i've heard it all from hey sherman i just want to run my business and do what i love to do not create a small business budget and i've heard hey sherman i just look at the money in my bank account it grows every month so i don't need a budget all right this eventually turns into sherman wait a minute i have to pay what in taxes are you kidding me dude i don't have that type of money right now you suck i have to find another accountant what are these self-employment taxes anyway dude what are you doing to my tax return or hey sherman dude i'm bleeding money here man i'm making money but it's not in my bank account anymore it was at first but as we've grown i just can't keep up with it it's flown out of control what can i do if you're following my drift here you can see how easy it is to ignore your accounting until things get bad really bad my goal today is to prevent you from dealing with headaches like this in the future they aren't fun it's very stressful and to be honest it's deadly a small business budget is the most fundamental part of managing your business finances correctly you need to set a budget track it and measure it against your actual situation and figure out what went right or wrong you should be looking at this every single month with all that said let's break down small business budgeting to its roots and get you squared away to work on your own budget okay so what is a budget put simply a budget is a financial plan to utilize the resources derived from sales the word sales is very important here because all budgets typically start with a sales projection then using your sales projection you can determine what expenses are required to operate your business successfully ideally you can set limits for various expenses that you have so you can ensure that your business is profitable at the end of the day so that's what a budget is but why are budgets important for small businesses there's a few reasons reason number one a budget guarantees your profitability if you set a budget and follow it there's no way that your business will not be profitable you should budget in your desired profit margin and if everything goes ing to plan you'll be running a profitable business reason number two a budget prevents the mismanagement of incoming funds in your business a budget forces you to prioritize the expenses that you take on for example with our marketing agency life marketing we wanted to grow very quickly so by nature we wanted to spend heavily into advertising and marketing and inherently we wanted to do all the marketing in the world facebook ads you bet let's spend three thousand dollars a month google ads you better we need to spend about five thousand dollars a month there we have to outspend our competitors seo i need that okay let's let's spend 2500 a month outbound sales teams yeah let's get some people on the ground how much does that cost 10 000 okay let's spend it we have to right i could go on and on on this train of thought luckily we had a budget in place and agreed to not exceed it for any reason at all like literally if our budget could talk she'd say wait wait wait a minute now you can't afford all of this our budget forced us to pick only a few marketing opportunities that we believed would yield the highest return and if and when those things didn't pan out we could swap it with other things on our list that we wanted to try now let's move on reason number three a budget creates a plan for every dollar in your business it's so easy to log into your bank account see that you have some money there and then start spending it but it's not sustainable and as your business grows you can spend yourself out of business or not be able to pay your taxes later then you'd have to deal with the irs and risk your business being shut down as dave ramsey says every dollar should have a destination in your business a good budget will assign value to each destination in your business which ultimately you have control over for example let's say you plan to make 100 000 in sales this year a good budget will take that sales number and say all right we'll spend 10 percent on marketing 40 on employee salaries 10 on rent and 10 percent on tools and software we're going to use then we'll shoot for a 30 profit margin after these expenses whether you make 70 000 or 150 000 your budget will spit out what you can do at that time and remain profitable all right by now you should know what a budget is and why it's important now let's talk about how you can start building your budget without all the complicated templates and spreadsheets online here are the simple steps you need to take to start building your budget step number one determine your business goals the very first step in determining your budget is to first determine your business goals are you looking to increase sales if so by how much what expenses will be necessary for you to accomplish that increase in sales or maybe you're looking to improve your product or service what improvements will you make what impact will it have and how much will it cost even wilder you might even want to buy a business what's the revenue of that business how much are you willing to pay to acquire that business your business goals should be top of mind when creating your budget knowing this will help you determine how much to allocate to certain expenses okay step number two forecast your sales all budgets start with a sales forecast and don't worry you don't have to whip out a complicated spreadsheet for this now i'll admit there are some simple ways to do this and some more sophisticated ways but for you i'm going to give you the most simplest way to get started with this if you're starting with nothing you'll probably have to guesstimate your sales projection based off of what is coming in your industry or if you know the marketing channels you plan to invest in and the correlated kpis and associated returns you can potentially project this based off of those kpis for more on this check out my video on small business kpis if you're already in business then this process becomes very simple a simple and conservative way to project your sales is to look at your sales numbers from prior years and compute the growth rate you'll want to know how much on average you're growing from year to year once you know this you can apply that same growth percentage to the sales you made last year to arrive at your annual sales projection for this year step number three allocate a percentage to each of your expenses once you have your projected sales you can start assigning a destination for those funds think of the major expense categories in your business like accounting advertising technology employee salaries and so on then assign a reasonable allocation to them based on what you expect to spend for example let's say you projected 1.3 million dollars in sales you can then break that down into expenses that you expect to have you can also find out the average expense categories and profit margins by looking in your industry specifically to help you with this now you will likely have to pay for this type of information or you can go to a firm like us that can help you find that information anyways the biggest thing here is to carefully consider all expense categories in your business and assign a reasonable allocation percentage to it also big tip be sure to account for your own salary in your budget yes your salary should be accounted for in the employee salary section not in profit this is especially important for new businesses i made the mistake of not budgeting my own salary in my first company and thought we were so profitable later i had to hire managers and executives to replace my work in the company and it was challenging because i never budgeted the actual work that i was performing in my own company by budgeting your own salary you can plan to replace yourself in the event you need to work on something else in your business or maybe you just want the business to run on its own without you regardless budget it in step number four convert percentages into dollar amount the final step here is to apply your projected sales to the expense percentages so you can see the actual dollar amount of your budget simply multiply your projected sales by your expense percentages now since you did this based on your annual sales and not monthly you can later convert this into monthly budgets by simply dividing all the amounts by 12. and that's it you will have your budget and can hold yourself accountable to that budget you don't need a fancy template to do this you can do everything i just mentioned by using basic multiplication and division now let's summarize this video today we started off by defining what is a budget remember a budget is simply a financial plan to utilize the resources derived from sales then we talked about the importance of budgeting first and foremost not having it will lead to issues in your business or with the irs if you're managing your business finances incorrectly that aside a budget also helps you maintain profitability it prevents the mismanagement of funds and overspending and it assigns a place for every single dollar that comes into your business that's it for today folks i truly hope you enjoyed the material in this video if you did please hit the like button for me it'll help me out a ton and don't forget to subscribe to our channel so you don't miss out on future content to help your business grow talk to you soon