It’s easy to overlook some expenses as you budget for the year ahead, especially if you’re a new business owner. Maybe it’s an expense that only comes up once a year, or expenses that you won’t encounter until your business starts to see some growth. Thinking about these overlooked expenses can help you plan ahead, so they don’t throw off your small business budget should they arise.
When you’re starting your business, you may not have the resources to host clients for lunch or buy them a meal after a weekend seminar. As your business grows, you may want to set aside a portion of your budget for hospitality expenses. Sitting down in a non-office environment can help you make personal connections with clients that office meetings don’t afford. Thank-you gifts after a project completion or during the holidays send a positive message about your working relationship. You may be able to write off some of those expenses on your taxes to help you make a good impression on your clients and save on your tax bill.
Many new business owners plan for initial legal fees for setting up a new business, but it’s also a good idea to budget for legal fees down the road. You may face legal situations, such as a client who sues you or threatens legal action. While you hope that never happens, being prepared by having a legal team on retainer or a budget line item allotted to pay your attorneys makes the situation easier to handle. You may also want to seek legal advice when it comes time to expand or when you need to purchase intellectual property. Talk to an attorney who can give you an idea of how much to budget for these expenses.
Employee Training Expenses
When you first start out in business, you may not have many employees, if you have any at all. But as your business grows, you may bring on employees. Even if you’re not yet ready to establish a human resources department, you still need to handle the on-boarding process, including training. That might include hiring a consultant or sending your employees to formal training sessions held by other organizations. Even creating your own training materials is a cost to your business since it takes your time to do it. Planning ahead for those training expenses ensures you have the money to train your employees properly to represent your brand well and perform their jobs optimally.
Renewal of Licences and Certifications
Certain startup work requires a licence or certification to establish the business and perform regular operations. Some of those licences and certifications need to be renewed annually or at other intervals. Staggering the renewal dates, if possible, helps spread out the cost, so you don’t take a big financial hit all at once. Another once-a-year related expense you may encounter are dues for professional associations that you belong to. Since these expenses only come up once a year, you may not think about them when you’re budgeting.
Your Own Salary and Vacation Time
As an entrepreneur and small business owner, you may feel a bit guilty about taking money out of your business in the form of your own salary. You may think that you should roll all income back into the company to keep it afloat and help it grow. While it’s laudable that you think about your employees’ well-being enough to pay them when you’re not taking a salary yourself, you shouldn’t underestimate the value of your own sweat equity. Write your own salary into the budget to make a statement about your value to the company. Doing so also lets you see clearly whether the company is really on a firm financial footing. When you pay attention to every line item in your budget, including expenses like these that so often go overlooked, you prove your own worth as a small business owner.
Another related expense is statutory vacation time for your self and your employees. Employees are entitled to minimum paid vacation time entitlement per year For yourself, wanting to take a vacation comes naturally, but requires different planning and budgeting than for a regular employee. For instance, if you don’t have employees, your vacation could place an out-sized burden on your finances, since you’re the only one doing the work. If your business has a slow time, such as the summer months or around the holidays, this is an ideal time for your vacation. You can also fill up your schedule prior to your vacation. This might mean long hours temporarily, but you reap the benefits from increased invoice payments that roll in while you are on leave. Another strategy is to set aside part of your earnings during the year.
Budgeting helps you make the best financial decisions for your company, and including all expenses, even the often overlooked ones, helps you increase your budgeting accuracy. With Intuit, budgeting is a snap. Always know exactly where your business stands. Make smarter business decisions now with Quickbooks.