My apologies to the all the accountants and bookkeepers, but for the rest of us normal people, keeping track of your budget and expenses sits solidly at the top of the TO AVOID list. With thousands of things to do at any given moment, small businesses rarely have time to devote to sorting out the numbers, and might not have the resources to pay someone else to do it regularly. Some of it makes sense, and some of it is just plain backwards. So most of us forget about it, or leave it all in a pile for the accountant to sort out.
But there’s a flip side to not keeping track of your budget, and it’s not a good one.
If you’re lucky enough to be running a small business and have extra money at the end of the month, you’re probably feeling pretty good about how things are going. But every once in a while, you probably wonder why there isn’t more of that extra money (accountants call it “profit”). If you’re manufacturing a product, maybe your costs went up. If you’re providing a service billable by the hour, maybe you aren’t tracking your hours carefully. Maybe a little advertising could help, but do you have any money for that?
If you’re not tracking your income and expenses, you’re never going to know if you’re doing well enough to afford to grow your business. And if your business isn’t growing, you aren’t making more money.
I learned something significant while reading Rich Dad, Poor Dad (http://www.richdad.com), and that was that accounting can be simplified into four categories: money that comes in (“income”), money that goes out (“expense”), things that make money (“asset”) and things that cost money (“liability”). And that’s as simple as it gets. I highly recommend getting the book (or stealing it from your neighbor…)
Tracking expenses is even easier, because there are only two categories, income and expense. Either someone handed you money, or you handed someone else money. Sure you can fancy it up with categories and such, but at the end of the day (week/month), either you have extra money or you have unpaid bills. Speaking of which, set your calendar to remind you to enter your income and expenses at the end of your work day. Fifteen minutes should be enough.
All “budgeting” means is that you plan to spend an amount in a particular category. Take advertising for example: If you plan to spend (“allocate”) NIS 500 per month on an ad campaign, when you pay for your advertisement, your expense gets tagged as an Advertising expense. If you’ve spent more, you’re “over budget” and if you spend less, you’re “under budget”. By comparing how much you spend over a period of time (week/month/quarter) to how much your income grows over the same period of time, you can decide whether to increase your advertising budget. It sounds simple because it it simple.
Technology steps in and makes it easier to track expenses and plan budgets. The good news is that as of yesterday (well, maybe last week), the Internet was full of online and offline budget planning and expense tracking tools. The bad news is that they’re often written by accountant types who revel in their own jargon and unnecessary complexity. Here are some of the more easily manageable solutions:
There are two plugins, Simple Business Manager and WP Finance. Neither are amazing, but SBM is definitely the more feature-rich plugin.
If you have an Android device, do yourself a favor and install MoneyWise. It’s easy, simple and intuitive. It got me over my confusion about all of this accounting nonsense.
Pocketsmith.com is a feature-rich online budgeting and tracking site that will appeal to visually-oriented people.
QuickBooks is the leader in simple, powerful desktop accounting. I have several connections with Quickbooks professionals, so let me know if you’re looking for someone.
I don’t deny the importance of keeping a budget and tracking your expenses. I just refuse to accept that it has to be complicated or intimidating. The truth is that once you get the hang of it, it’s almost exciting to see how well you’re business is doing.