Calculating business expenses can feel like a headache at best and a major point of anxiety at worst. But it’s necessary to keep your business afloat. If you find that your expenses vary wildly from your budget and feel yourself drowning in them, you may just need to learn how to predict business expenses more accurately.
When you predict business expenses clearly, you can create a fitting budget for the month or quarter and adjust your marketing and sales strategies to help you turn a profit despite the expenses. You may not be able to predict every curveball, but the more prepared you are, the better.
Look At Your Past Data
Your primary business expenses are the ones you’ll have to pay for from month to month, year to year, or quarter to quarter. Regardless of the period, looking at your past data will give you a sense of the business expenses you have coming your way. Make sure to document these recurring expenses — from subscriptions to time to restock office supplies — and set reminders. Work them into your budget every time you address it.
Take Inventory
Before you start predicting your business expenses for the next month, take inventory of your current situation. Write down your recurring expenses, one-time expenses, your revenue, your profits, and more. This will give you a sense of the “baseline” for your business expenses and help you to predict whether you’re on track or not in the months going forward.
Set Your Goals
Yes, just like setting a marketing strategy, a business plan, or a sales strategy, you need to set your intentions for financial forecasting. Are you looking for ways to cut expenses or are you looking for the gap between your expenses and your revenue? When you know what you’re looking for, financial forecasting will be a much less sprawling, overwhelming thing. It will also help you predict your expenses more accurately.
Take Into Account Your Revenue Streams
Does your business just have one stream of revenue — your online shop, for instance? Or do you have multiple streams of earning money throughout the month? In most cases these days, it’s the latter. You may have subscriptions, services that you offer, membership plans, and your online shop. Or you might have an online shop and a physical shop. While these aren’t expenses, they’re still important to keep an eye on. The more revenue you have, the more comfortable you can be in your business expenses.
Make Use of Software and Digital Tools
If predicting your business expenses seems frustrating to you, you might benefit from a digital tool. Find a software or platform that will compile all of your data and create reports of your expenses from month to month. The program can do all the work for you: predicting your expenses for the next month, reporting, and analyzing your expenses. You may even be able to gain insights on ways you could save your business money. Something like Vena, Planful, or Jirav might help you in this case.
Create a Habit
Part of the reason that it’s difficult to predict your business expenses is that the world of business is so changeable. Your customer base may change, your needs may change, and your business model itself may change. So predicting your business expenses well for one month doesn’t mean that prediction will hold up for months to come.
Every time something changes in your business, you should reassess your projected business expenses. Make room for change, and plan your projected sales based on the need. Make a habit of predicting your business expenses each month and you’ll be more prepared for changes as they occur.
Why Does This Matter For Marketing, Sales, and Client Management?
Finally, let’s talk about why this matters — or more accurately, why it matters for different aspects of your business. Keeping a handle on your business expenses is essential when it comes to your bottom line, but it can also impact things like marketing, sales, and client management.
When you get a clear look ahead at your cashflow, you can more easily manage your budget for things like marketing and sales. If you have to have an abnormal amount of business expenses one month, you may need to pull back on marketing and sales budgets. This could mean that you dedicate more time to social media marketing and stellar client management, fostering relationships with those individuals who are already part of your customer base. If this boosts your profit, you can then cover your business expenses and add a little more into marketing and sales going forward.
