Avoid Three Common Errors in Budgeting

When it comes to budgeting, it's absolutely essential to estimate your spending as realistically as possible. Here are three budget-related errors commonly made by small businesses, and some tips for avoiding them. These errors tend to throw budget estimates out of line with reality, thereby taking away from a budget's usefulness.

1. Not Setting Goals. It's almost impossible to set spending priorities without clear goals for the coming year. It's important to know, in detail, what you want or need to achieve in your business.
2. Cost Underestimation. Every business has ancillary or incidental costs that often don't get budgeted. For example, each time you buy a new piece of equipment or software, you must budget for staff training and for maintenance of the equipment, as well as the actual cost of the equipment.
3. Lack of Flexibility. Don't be afraid to update your forecasted expenditures either several times per year or whenever new circumstances affect your business. Compare estimates to what you actually pay out, and then adjust your budget figures.

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