Do solopreneurs need to budget and track business expenses?

Some experts will tell you that entrepreneurs who focus on marketing and sales can expect to weather the economic hardships that most small businesses face when starting their ventures. Some place a higher emphasis on the value of product development while others (like me!) champion the implementation of streamlined backend operations. Regardless of your position, everyone can unequivocally agree that mismanaging finances inevitably impacts the viability of a business.

Specifically, when it comes to the role of business expenses. Every entrepreneur understands the importance of revenue, but expenses are generally viewed as an inescapable byproduct of doing business. But do we give the activity of business spending the consideration it deserves?

What do business owners need to know about expenses?

There is significant potential for financial errors when running a business which include, but are not limited to:

• No emergency fund for sudden business hardship
• Spending too much on inventory
• Not paying yourself as the business owner
• Mixing personal and business finances

While all these are certainly mistakes that should be avoided at all costs, there’s one area that needs particular attention – expense tracking.

Why is expense tracking so important?

At the risk of sounding like a broken record, I’m passionate about budgeting and tracking expenses. I’ve been in some tough financial situations in my life. I’ve also had major economic breakthroughs. Do you want to know what the most important difference between these two is (other than the dollar amounts)? Mindset.

During times of plenty, I spent more than I should have due to a lack of a budget. In times of drought, I was able to do more with less when I stuck to my budget. As a business owner, this mindset is even more crucial. In my opinion, being financially organized is just as important as having a streamlined process (another track on the same broken record I mentioned before). Needless to say, without tracking your cash flow (i.e. exactly how much comes in versus how much is spent), it’s difficult to make decisions that can grow your business.

Where should a business owner start?

Think about the specific questions that need to be answered for your business to function effectively.

• Should I spend on advertising? If yes, how much?
• When is a good time to invest in equipment or buy inventory?
• Am I saving enough?
• Are my expenses too high?

Because business owners can sometimes experience what is called “decision fatigue”, where the quality of determinations declines as the day or week wears on, it’s always best to have (and stick to!) a plan. This is where having a budget and tracking expenses can help a small business achieve its short- and long-term goals.

Here are a few things you can do to get the ball rolling:

1. Jot down your top 3 reasons for creating a budget. It may have to do with planning for unexpected expenses, paying down debt, or just a way of identifying areas for overspending.

2. List all income and expense transactions every month. Try to use the most accurate numbers available to you. You can pull your most recent banking records (at least 3 months) and average your most common transactions.

3. Create a budget and track your spending! Determine how much you would need to spend each month on each transaction (or expense category) to accomplish your goals. Compare your actual monthly expenditure against your planned amounts and adjust accordingly.

Are you ready to see your business grow?

Creating a budget and tracking your business spending are the best ways to start your journey toward becoming financially organized and goal-oriented. Knowing the true status of your finances can help you make important and timely decisions about the direction you would like to take your business. If you are ready to take this important step in your business, feel free to reach out to get started.

How important is tracking your business expenses to you?

Shalom, everyone!