Mastering Business Budgeting – The Ultimate Guide to Having Money in the Bank | Ep. 227

Intro/Outro: You know what it is. That’s right. It’s time to talk money. With your money nerd and financial coach. Now tighten those purse strings and open those ears. It’s the Money Talk with Tiff podcast.

Tiffany Grant: Hey, hey, and welcome to another Tiffany’s Take where I answer your money questions. If you want your question answered on the podcast, go to www.moneytalkwitht.com/. Ask Tiffany and I’ll be happy to answer. So for today, we’re kind of continuing the conversation from the last episode where I talked about common accounting mistakes, um, that small business owners make.

Now, as a result of that episode, I got a few questions about business budgeting, um, and also just throughout. Me helping small business owners, that has constantly came up. Now, honestly, I’m gonna be real with y’all. People used to ask me all the time, Tiffany, do you do business, finances, business, finance, business, finances?

And I used to always say no. That is not what I do. I do personal finance. But you know when somebody, or a lot of people keep asking you about the same thing, apparently it means that A, they see you as a valuable resource. And two, that may be what you need to be doing. So instead of fighting the wave, I’m just going to lean into it so that way I can share my knowledge, um, with other small business owners and hopefully this can make a difference in your business.

So I wanted to talk about business budgeting because a lot of small business owners that I know of or that I’ve helped, they do not do this at all. And this is one of the things that I do pretty much on a daily basis along with my personal budgeting. And it has been so helpful when it comes to my business.

You know, understanding where my money’s going, what’s coming in, you know, all that other stuff, um, that you definitely need to know. Otherwise, you’ll just end up. Kind of like what personal finances end up in a rut where you look up and all your money’s gone. So I wanted to dedicate this entire episode to talk about business budgeting.

So first let’s just talk about the importance of business budgeting. So the first I feel is the ability to anticipate future expenses and revenue. This one’s big. Um, I know for instance, to give you an example, Last month, April was the biggest month I’ve had all year. How do I know that? Because I’ve been tracking my expenses and seeing, okay, I made the money from here.

I made money from there. Um, I know exactly what came in. I know exactly what went out, and I know exactly what my profit was, and so, It allows you, cuz now I can look back at that number and say, okay, what worked out, what didn’t? And then take what did work and then just double down on it for this month.

Right? So now it’s only May 7th and I’ve already made, I would say about a third of what I made, um, for the whole month of April. So, Just thinking about it in terms of that, it also helps you with cost planning and forecasting. So forecasting is just like, you know, if you think about a weatherman, right?

They’re forecasting what the weather is. They’re saying, oh, we think it’s going to be sunny tomorrow with the chance of rain. And so you can do the same thing with your business. And so budgeting helps you with that process. Cuz like I said, I. Can look at my numbers and see, oh, well, since I’ve already made X amount for this time, This, this month, then I know, Ooh, I can probably make this much this month.

You know, and so you can kind of just forecast that out and also think about your costs coming up. Uh, it also provides a framework for decision making. I’m not gonna dive into that cuz I’ve already have. Um, and then it helps. In identifying any overspending or underpinning? Honestly, this is where it helps me the most because I am a tech nerd and I love trying all the things.

If you know me, I love trying all the things. I talk about it all the time on social media, and it gets really expensive. Especially, you know, if there’s like a free trial and let’s just say, oops, I forgot to cancel before they renewed it. It gets very expensive with all this business software that I try, but I love trying it and I love doing it, so I’m not gonna stop already know that.

So what kind of safeguard can I have in place to make sure that I’m not spending all my business revenue in software? And for me, that’s the budget, because I can look at the budget from the previous month and say, okay. I started this subscription, I can evaluate, okay, do I really like this? Do I not like this?

Yeah, let me go ahead and cancel, you know, so on and so forth. So I feel like a budget has been super helpful with that. And then also it helps in securing funding from lenders and investors. I know with the last episode in the past couple of episodes, I had talked about grants quite a bit. Um, But with grants and loans, sometimes they wanna know what your budget’s gonna be, especially if it’s a grant for a program that you’re gonna run, they’re gonna wanna know what that budget is.

And so it’s important to at least understand how business budgets work and how to create one. So that way if you come across an opportunity like that, you’re not. Looking around like, oh my gosh, what do I do? Right? Uh, so that’s another reason why it’s important. It could be the determining factor when it comes to securing funding.

So now that all of that’s out the way, let’s talk about how do you create an effective BU budget for your business? Now, for me, I do a budget for the whole entire year before the year starts. So I did my 2023 budget in December of 2022, um, just to kind of forecast, remember that word, um, kind of forecast what I should be looking at for this year.

Now I have something that I can, you know, kind of compare against as I’m going from month. A month. So I might have said, oh, in January I’m gonna make X amount from this, X amount from that, X amount from this, and I can look at the January actual numbers and see if they match my forecast. If they didn’t match my forecast, then I can kind of nail down.

Okay, what went right, what went wrong? What should I be doing differently? Is there a part of my business that I don’t need to do anymore because it’s not making any money? You know, that type of thing. So first you wanna assess your revenue and expenses. That’s the very first step, whether you’re working on.

Business or personal, you have to figure out how much you’re already making and how much you’re already spending. Um, on the personal finance side of things, I always tell people to track for at least a month or at least go back to the last month’s worth of expenses and income. To see where your money actually went and make sure you write it down is not enough for it to just be, you know, the mental accounting.

Make sure you put it down somewhere and I’ll get into a little bit of what I use later on, but just wanted to bring that up. Um, once you assess your current revenue and expenses, then you kind of wanna forecast your future expenses and cash flow. So you know, I. Once you figure out where you are or where you’ve been, you wanna know where you’re going.

And so let’s say for instance, because when this releases, it’ll be what May 9th. It’s May 9th. We’re nine days into the month, but that’s okay. We can look back at April and then create our budget. Going from May 9th forward based on our April numbers. So that’s kind of what I mean by forecasting your future expenses and cash flow.

Then you wanna set some goals around that data and that information. So like I was saying before, if I knew that I made X amount in April on one side of my business, then maybe for May I put in my budget. I wanna do, let’s say 10% more. Okay? I can go ahead and set those goals firmly and I can set those goals confidently because I already know what I did.

Um, then you kind of wanna develop a contingency plan. So what if you don’t make your numbers? What if, because you know, entrepreneurship, like I tell you all, all the time, it’s not gumdrops, lollipops, and rainbows. Okay? It. Has its ups, it has its downs, and they can happen literally in the same day or overnight.

Okay. And so you wanna have a contingency plan in place, like if something comes up, what do I do now?

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So when you’re looking at your budget, you can say, okay, if I don’t make 10% more, that means I might need to cut back on paying some of my staff or paying, um, for, for me some software or something. But you can know that ahead of time versus. The, the time comes up and then you know you’re caught and you can’t do anything about it.

So it’s, it’s best to look ahead of time, do your best case scenario, and then do your contingency plan. And when I’m coaching my business owners through their budgets, I have them make a bare bones budget. Like, okay, what do you need to survive to pay your bills? Especially if you’re a entrepreneur and this is your only thing, you don’t have a nine to five.

You wanna know, okay, how much does my business need to make for me to survive? And that’s my personal and my business expenses. That’s your bare bones budget. Then I also have them create an ideal budget. Okay, now we’re factoring in all of the nice to haves. We’re factoring in what you really want. Um, and so that way you can see, okay, With my bare bones budget.

I need to make X amount this month with my ideal budget. I need to make this amount. And then you can start breaking those numbers down by month, by week, by day. I like breaking them down by day because when you’re looking at those big numbers, sometimes big, I can’t speak to everybody’s budget. When you’re looking at those big numbers, you’re like, dang, how can I do that?

But then when you break it down by day, It all makes it so clear and makes it much easier to digest. When I first started my entrepreneur journey back in 2019 as a full-time entrepreneur, cuz I’ve been doing this since 2017, but as full-time back then it was $50 a day. That’s all I needed to survive to, to fund my business and to fund my personal life, pay all my bills, and when I said $50 a day.

I was like, oh, I could do that easily. You know, I can easily do $50 a day, but had I looked at that big number, what I needed a month, I probably wouldn’t have stepped out in, you know, as a full-time entrepreneur. So it really puts things into perspective. So what are some budgeting mistakes that you should avoid?

First and foremost, overlooking unexpected expenses. If something comes up, always make sure that you have room in your budget for something unexpected. I don’t care if you know every 10th of the month at. [2:55] PM this bill come out. I don’t care if you know it down to a science, you still need a cushion in there.

You still need a buffer because you never know what might happen. And also what I’ve seen with business owners that I’ve coached is that there’s yearly expenses or quarterly expenses that they forgot about and all of a sudden, oh my gosh. This, um, software is coming out and I didn’t account for it in my budget.

So anytime I have something like that come up, because ideally you wanna look at your past year of expenses just to see if anything like that is out there. But I know a lot of people aren’t money nerds like me, and so even just looking back a month is terrifying for people. So if it is, don’t worry about it.

Just when those things come up and you realize that they’re there. Go ahead and plug it into your budget at that time so that way you know, okay, next year at this time I will be prepared. Cause I know it exists. Sometimes that happens to me. Cause like I said, I try a lot of different softwares for a lot of different things and sometimes I forget that I pay for something.

And so even me, I, when that charge comes back around, I’m like, okay, let me go ahead and plug it in my budget now, because apparently I, I missed it that time. Um, so wanna make sure that you’re doing that. Also, failing to track expenses throughout the year. This is a huge one and honestly, I have been guilty of this before.

Um, I’ll be real with you. You know, I was that type of person where I would plug any everything into QuickBooks, December. 30th so I can do my taxes for the next year and see where I was. I luckily, I don’t do that anymore, but I completely understand. I’ve been there before. It’s very, very, very important to track these things throughout the year because if you wait for the end of the year and you look back and you haven’t been profitable since April, then it’s a issue.

You know, you’ve been running a business in the negative for most of the year, and you didn’t even realize it. So it’s important to catch these things early so that way you can start making the changes, start making the improvements. As you go versus waiting until the end of the year or wait until tax time and you’re like, oh, that’s all I made in my business.

Oh, that’s how much I actually, you know, and it’s all a surprise. Track these things throughout the year so that way you can be in control of how that money’s flowing. So I covered a lot. I wanna cover one more thing before we get off, and I just wanna give you some strategies for sticking to a budget. Um, I would say the first thing is to use budgeting tools.

So I personally like. Uh, you need a budget. I use it for my personal and my business budget because you can make multiple budgets in there and it is very, very helpful. Um, when it comes to tracking on a daily basis, then I step into QuickBooks when I wanna do the more monthly, quarterly, yearly, you know, stuff like that.

I’ll track daily and you need a budget, and then I’ll go into QuickBooks monthly. And when I go in there, at this point, it’s just a matter of making sure everything is categorized right. Because QuickBooks does an awesome job of categorizing things for you, and all you have to do is go in and approve.

And so, cuz they, of course, a lot of businesses use it, so they have machine learning already learning what some of this stuff is. So like, Let’s say, just giving you an example, you go to a McDonald’s, it’ll automatically know that this is a food restaurant. You know what I’m saying? And so now you just have to go in and make sure it’s correct.

So that’s what I would do. Um, On the monthly basis, but on a daily basis, I use, you need a budget and this stuff I go through and I go over in my business Money makeover course, um, programs. So I give you all of the steps, tools, and resources that I use and my whole process on how I, um, manage that. Then another thing you wanna do is, Regularly review your financial statements.

So I pull a profit and loss statement every month from QuickBooks just to see where I’m at. Um, I pull a balance sheet, and this is stuff again that I go over in the Business Money Makeover course, how to read, profit and loss statements, how to read a balance sheet. Why this stuff is important. Um, some other reports that you can run, uh, all of this stuff is important so that way you can see where you are and making sure that you are reaching those financial goals that we set before.

Also cut costs wherever possible. For me, cutting costs mainly looks. Like, you know, cutting services for the most part. Um, but you know, it might, could be maybe you have someone on your team and you realize that this person is not, um, providing value anymore. Maybe your business went a whole nother direction and now you know, their position is no longer needed.

You’re not gonna realize that until you have a budget or you’re looking at your financial statements and things like that, and you’re like, oh, you know, this side of my business is not really making enough to sustain this person, so why am I doing it? You know, and it’s never, I. Um, easy to let people go, but at the same time, as a business owner, you can’t have your emotions in the business.

Your business is a business, right? And you also don’t want your business to run into the ground just because you’re trying to be nice and so, Having these things in place, you’re able to make these decisions easier and make them more timely and, you know, be able to make sure your business is profitable.

So that’s all stuff again that I cover in the Business Money Makeover program. But it’s important. It is so very important, um, to make sure that you’re doing that. And then, Just make sure that you’re monitoring your performance. I mean, at the end of the day, that’s what this whole conversation is about, is making sure that you are in the loop with how your business is doing, what is doing, why it’s doing, and all those good things.

So I. Those are my strategies for sticking to a budget, a business budget anyway, so hopefully this. I know it was kind of long. Usually I don’t do Tiffany’s takes that are this long, but hopefully it was helpful and as a business owner to other business owners talking to other business owners. This stuff can seem like it’s a lot, but honestly, once you start having the systems and processes in place, it’s not as difficult.

I mean, when I’m doing my budget, for instance, I. I do it along with my personal budget. It only takes me maybe five to 10 minutes a day, um, weekly, maybe another five to 10 minutes, and then monthly, maybe about 30 minutes or so to get through everything. And that’s just because I have the process and system in place.

And I can sit there and say, you know what? I know exactly what’s working. I know what’s not working. If I try something new, I know whether it was, uh, uh, it succeeded or it flopped, and then I can take those learning opportunities and move on. You know? So all of this is to help you as a business owner, iterate, iterate, iterate, keep iterating, um, fail early, fail often.

I preach it all the time. So anyway, hopefully this. Episode was helpful. And if you have any questions that you wanna ask and I’ll answer on the podcast, go to www.moneytalkwitht.com/tiffany and I’ll be happy to answer. So with that, I hope you stay profitable and well. Bye.

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