Simple Steps to Help You Manage Your Print Shop’s Budget
Without a doubt understanding the financial health of your business is vital to its success. Now, I get it: Decorators just want to print. We don’t want to be bogged down by back-office operations, but without a solid, simple budget plan, your business might end up in the Craigslist “For Sale” graveyard and we don’t want that!
Similar to how we create game plans when we get started in the business to help identify our target audience or the best choice for the business’s structure (sole proprietorship, LLC, LLP, etc.), creating a financial game plan is equally important. Your game plan should look something like this:
- Identify the financial institution that will best meet you and your business’s needs.
- Confirm the software you will use to manage your business’s finances. I recommend going with an option that consolidates your banking and sales data in one place for ease.
- A timeline for your budget process.
- An outline for how often you will review and balance your statements.
Even if you have an accountant that handles this stuff, I encourage you to read on. Understanding why they do what they do will likely improve the relationship.
If you remember anything from this article, know that whether you have little or no accounting or bookkeeping experience you can successfully manage your business’s finances. The good news is that technology is a major part of that success. It’s there to help you automate these processes. Think about how much the automatic press has saved us all time!
Creating a Simple but Effective Budget
Budgeting doesn’t have to be a daunting task. Once you’ve created the first one, the ones that follow basically use the same format. What’s important is identifying the budgeting method that best suits your needs. Here are a few tried-and-true budget formats.
Zero-based budgeting
No surprises here, zero-based budgeting is when you start at $0 and evaluate every function of the business to see what expenses are likely to happen in the year being budgeted.
Incremental-based budgeting
This style of budgeting is often praised for its ease. To get started, you use your current budget and apply increases or decreases to the base numbers at your discretion.
You might determine that a simple increase for Consumer Price Index (CPI) works. For updated CPI rates, visit the Bureau of Labor Statistics website. We won’t debate here whether CPI is the best method to measure inflation — that’s a whole other topic. For the purpose of creating a simplified budget process, it will work just fine.
Of course, in order to use this option, you have to already have a budget. If you’re just getting started, create a zero-based budget initially and apply incremental budgeting practices to your base budget for future years.
Value proposition budgeting
This method is all about — you guessed it — value. It looks at the qualitative characteristics of costs to determine what benefit each cost brings to the business.
So, what style is best? That depends on what you value. If being conservative is your objective, then zero-based budgeting is more ideal because you are uniquely evaluating each year. However, starting from zero every year can be time consuming.
If you seek a laxer approach, then incremental-based budgeting might be more favorable. Just keep in mind that it can lead to overspending considering that expenses aren’t truly evaluated.
The Basics of Bookkeeping
Bookkeeping is often mistaken for accounting, but they are different. Bookkeeping is the practice of recording your business’s transactions — cash in from sales, cash out from expenses.
In my opinion, two core aspects of bookkeeping are completeness and classification. Completeness meaning making sure that all business transactions are recorded, everything from the spray adhesive to the new exposure unit. Classification refers to identifying the nature of the expense or revenue (i.e., supplies, sales, etc.).
Without accurate records, you’re walking in the dark, step by step approaching Craigslist’s “For Sale” listings where the next budding printer will purchase the awesome equipment you spent so much money on at a fraction of the cost.
So how exactly do you manage these processes? A good practice is to use technology to your advantage to automate them.
Here is a short list of budgeting and bookkeeping apps/plugins that integrate with the most commonly used e-commerce/POS platforms. As you can see, the e-commerce world still has some catching up to do when it comes to budgeting and bookkeeping software for e-commerce and brick-and-mortar businesses, but these are trusted options.
These options are ideal because they consolidate data by merging it from your bank account and POS system into a single location.
- Quickbooks – most popular
- XERO
- Freshbooks
- Wave
Keep in mind that your financial institution is also another great resource. Nowadays, most banks offer budgeting and bookkeeping tools within their apps that can get the job done.
How to Financially Plan for Growth
Since you’ve followed all of the tips mentioned above, you have accurate financial records and understand the health of your business, which means you’re in a good position to plan for growth. Knowing how much cash you have on hand and what you need will help you avoid the urge to over-borrow.
The various ways to get funds haven’t changed much since the birth of modern-day crowdfunding in 1997:
- Borrow from trusted personal sources such as family and friends
- Personal savings
- Grants
- Loans
- Crowdfunding
Before jumping to any conclusions, consult with your banking institution and other trusted sources to determine what resources are available to you to help you reach your growth goal.
What better time to set a goal to be more fiscally responsible. Create your 2022 financial game plan and manage your print shop’s finances like a pro.
Happy printing!
Additional resources that I’d like to share with you for more information: