Get Help Developing Budgets for Your Phoenix, AZ Business

What Should You Take Into Account When Building a Budget for Your Business?

Revenue – The most important factor for businesses seeking sustainable budgets is current and predicted revenue. Revenue and cash flow considerations tend to go hand in hand, especially for businesses with predictable revenue but inconsistent cash flow. For example, retail businesses that tend to sell a lot during the holidays will likely experience low cash flow in the first couple months of the year but high cash flow in the last couple months of the year. It’s important to budget accordingly to get you through periods of low cash flow.

Fixed Expenses – These are the expenses that you know you’ll have regardless of other business factors. For example, you know you’ll need to pay rent, your insurance premiums and utilities each month. Fixed expenses are the easiest to manage because they are inherently predictable.

Variable Expenses – These are the more unpredictable expenses. What counts as a variable expense for your business will likely be somewhat unique to your industry. Marketing might be a variable expense or labor costs if you must hire temporary or seasonal employees. Budgeting properly for variable expenses is important. It’s better to expect higher variable expenses and be relieved when your actual costs come in lower rather than unexpectedly going over your variable expenses budget.

One-off expenses – Not every expense is going to be fixed or variable. This is especially true for businesses that rely on machinery or vehicles. A fleet vehicle may last for five years, 10 years or even longer depending on its reliability and frequency of use. When one breaks down, it will need to be replaced. Vehicle replacement may not be an expense you’ll be forced to incur every year. Restaurants might also have certain types of expensive equipment, like fryers, ovens or walk-in freezers, that will necessitate periodic one-off expenditures.