Budget and Expense: why you an entrepreneur must know and understand this.

In the entrepreneurial world, money controls the business. How entrepreneurs make and spend their money determines how long the business survives.

Most startups in Nigeria and Africa are said to die between their 2nd and 3rd year of existence and this is solely based on how they manage their finances and their financial literacy level.

Budget and expense are two major aspects of running a business that must be understood by any entrepreneur if they are to survive through the first 2–3 years of their existence and beyond.

Budget and expense for an Entrepreneur

What is budgeting?

Budgeting is the process of creating a plan to spend (expend) your money. This spending plan is called a budget and the money spent is called expenses. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do.

Budgets are based on history and experience in the business or in the projection of a new business.

In as much as budgets also require that a business has stable and predictable revenues, it is also important for a new business or prospective business owner to have budgets in place to start and run his/her new or prospective business. This positions the new business for proper financial management and making expenses stable and predictable.

While setting budgets may seem like a relatively simple process, it can profoundly impact the survival of your business.

Budgeting needs to be implemented deliberately. The first step in implementing budgeting is to make sure that key employees are familiar with the financial statements of the business. This may take a few months of reviewing monthly financial statements so they can begin to understand the financial model of the business and their role as managers in influencing revenues and expenses.

What is an Expense?

This is the cost of operations that a company incurs to generate revenue. As the popular saying goes, “it costs money to make money.”

The goal of any company is to maximize profits. This is achieved by boosting revenues while keeping expenses in check. Slashing costs can help startups to make even more money from sales. However, if expenses are cut too much it could also have a detrimental effect.

It is the year 2020, and small business owners are leveraging different digital tools that help them maximize the cash flow of their business through controlled spending that could be Artificial Intelligence assisted. One such tool that provides this service is FLEX.

Flex is the leading expense management and budgeting app for businesses in Nigeria. It is a smart expense manager designed for solo business owners, startup companies, and enterprises. Flex is for any size of business. With automatic expense tracking and management, digital budgets, real-time spending insights, businesses can now worry less about balancing accounts and can now close books in seconds.

Benefits of a budget to an entrepreneur

There are a number of benefits when an entrepreneur draws up a business budget, including being better able to:

• manage your money effectively
• allocate appropriate resources to projects
• monitor performance
• meet your objectives
• improve decision-making
• identify problems before they occur — such as the need to raise finance or cash flow difficulties
• plan for the future

“Don’t tell me what you value, show me your budget, and I’ll tell you what you value.”― Joe Biden