A cash flow crunch can kill a growing business before it has had time to establish roots. Meeting unplanned expenses by taking on debt can put your enterprise into a downward spiral of loan payments and finance charges. A budget is one of the most powerful financial management tools you have to track revenue and monitor spending, but to be useful, a budget must be accurate. While you may have a good handle on basic expenses such as rent, utilities, inventory and payroll, you may miss other less obvious costs of doing business. These expenses, while they may be a small percentage of total expenses, will eat away at your bottom line.

Shrinking inventory

Shrinkage is the loss of inventory due to damage, spoilage or theft. Shoplifting and employee pilfering can cost retailers as much as 2 percent of sales. This expense can be mitigated with an aggressive risk management program, but keep in mind, that is another cost. Wholesale and retail food service businesses must factor in spoilage when building a budget. One study found 4 to 10 percent of food purchased by restaurants never makes it to the customer.

You can calculate your shrinkage when you complete an end-of-period inventory and then take action to reduce this expense. Some shrinkage is unavoidable, and its cost to your business should be factored into your budget.

Education and training

You and your employees need to stay current with industry trends. Your business may require regular training to maintain permits and certifications. Be sure to allow for training and education in your budget, including transportation and other expenses you will incur to attend workshops and conferences. Include in this amount the cost of dues to professional organizations and subscriptions to trade journals.

Your online presence

The cost of a website doesn’t end with the launch. Websites need to be continually updated and secured. To keep your site ranking high in search engine results, you will need to add fresh content regularly. Don’t forget your social media presence. You will want to roll out your posts in an organized fashion and ensure you maintain your brand across all platforms. You can either assign employees to the task or hire a freelancer to keep your website and social media current. Be sure to include this expense in your marketing budget.

Maintaining equipment

While you can expect trouble-free operation of new equipment for some time, and warranty coverage if there is a problem, it is vital you attend to regular maintenance. You’ve tied up much of your capital in equipment. Maintenance will help hold the value of your assets, prevent costly repairs and expensive downtime. Equipment maintenance and repair is an important line item in your annual budget. Don’t skip it.

Office supplies you may forget

You know you need to shell out for ink cartridges and toner, a few reams of paper and some envelopes, even if you only send out proposals and invoices, but you may discover the office supply category includes much more. If you have employees at your location, you need to provide a restroom and a break room area. This means paper towels, toilet tissue, hand soap, possibly coffee, coffee filters, and snacks. You will need cleaning supplies or a cleaning service. Other items to consider are first aid needs and fire extinguishers. Check with local codes, as these may be mandatory.

Without data from past years, estimating these costs takes some guesswork. It may be better, in your first year, to overestimate in some areas, and revisit these estimates at the end of each quarter. Your budget reflects your ambitions, and it is good to aim high with revenue goals and cost efficiencies, but your budget must be realistic if it is to serve its purpose.

This article was written by Gillian Burdett for Small Business Pulse

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