When you sign up for PayPal Business in a Box, you get access to Xero, online small business accounting software that’s simple and easy to use. Below, the Xero team offers tips for creating a small business budget.
Small business budgeting doesn’t have to (and shouldn’t) be a guessing game. Armed with good, accurate numbers, you’ll be able to create a budget that will help you cut unnecessary spending and get to profitability faster*. By taking the time to look at the right accounts, you’ll be able to figure out things like how many sales you need to cover costs, how much money you can reinvest in the business and when you can afford to hire help.
It’s easier than you think, the scope of a budget comes down to three figures:
1. Profit & Loss Report
This report is calculated by subtracting your expenses from your income, and will show you one of two things: if you’re making money or losing it. Income, otherwise known as revenue, put simply is the money you are generating from sales of products and services. It can be helpful to break down income into two categories: recurring and expected. Recurring income is regular revenue from things like retainers and contracts and expected income is predicted future income.
Expenses or costs refer to the cash you are spending on things like staff, raw materials and marketing. Like income, expenses can fall into two categories: recurring and sundry. Recurring expenditure encompasses rent, utilities, payroll and the like, while sundry costs are one-off payments like client entertainment expenses.
2. Balance Sheet
A summary of what your business is worth, the balance sheet shows the difference between what you own and owe. The balance sheet shows your business’ assets, including their value, as well as cash in the bank and outstanding invoices. On the liability side, you’ll be able to see outstanding expenses, loans or debt, and upcoming taxes to be paid.
3.Trial Balance
A representation of the entire balance of your business accounts, the trial balance shows all your debits, credits, assets and liabilities.
Creating the budget
Now that you have these tips to help you create a budget, all that’s left is to get started. That said, it can be pretty time consuming to sift through financial records to get the financial data you need. An online accounting platform like
Xero will enable you to record your income and expenditure automatically. Better still, it’s quicker and the relevant data is displayed on insightful dashboards, making spotting trends a breeze.
Bringing in an expert to help you comb over the numbers and create a budget will give you additional assurance that you’re on the right track. While you will have to pay for the services of an accountant or bookkeeper, their professional expertise will pay for itself numerous times over.
With an accurate budget, you’ll be empowered to make strategic decisions to help your business thrive.
To get started managing your finances and cash flow with Xero, sign up for
PayPal Business in a Box. It gives you everything you need to sell online, accept payments, and manage your finances. It’s all tied together to work seamlessly and simply.
*This article represents the thoughts of the author. You should always seek your own independent business and legal advice