During months when your business is slow, you’ll need to lower your flexible expenses. If you find it’s challenging to stick to the budget you created, remember that it will take time and ongoing adjustments to find the right balance. It’s important to continue tracking your revenue and expenses to make sure you’re sticking to your goals. Creating a budget is just the first step. You will need to lower your expenses or increase revenue (or, even better, do both) to make a profit. If the result is a negative number, your expenses are greater than your revenue. If the result is a positive number, congratulations - you should be on track to make a profit. It’s a simple step that can reveal how much profit you could be making. Once you’ve totaled up your revenue and estimated expenses, subtract the expense total from the revenue total to get the difference. It’s important to be as precise as possible, as expenses can vary greatly from month to month. Divide your expenses into fixed costs (those that don’t change from month to month, such as rent, salaries and insurance payments) and flexible expenses (costs that change, such as raw materials and commissions). The best way to do this is to track how much you spend in a month. To create a monthly budget, you should first determine how much money you make by listing sales, investments and any other revenue sources. The key to creating a successful budget is to add up all of your revenue sources over a 12-month period, forecast your expenses to estimate your profit (the difference between your revenue and costs), and frequently review your budget through monitoring monthly. Profit or Income – The amount remaining after you subtract revenue from expenses.
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