First, if you have never done it before living within a budget can be difficult as well as educational. For instance, knowing how to reasonably trim your expenses, or how much of a cash reserve to keep on hand will take time to develop the skills. Learning along the way, adjusting when appropriate will become easier as you practice.

Next, you developed a budget, but that was a best guess. You will need to be prepared that you will most likely miss your budget projections. However, your actions in correcting the missed budget will be adjusting it accordingly. Specifically, if you have a bill that you budget for, say around $100 a month and for the last three months it has been consistently around $150, this is where you will need to adjust your budget accordingly. If it is running less expensive than you budgeted for, you can then reallocate that money somewhere else within your budget.

Even though you have established a budget, this does not mean that you become extremely rigid in regard to the budget. You will need to be flexible to change things accordingly, such as your revenue is not as high as you had budgeted for, then you will need to trim back on expenses, and if you are bringing in more than expected, you may want to invest the money into upgrading equipment, etc.

Additionally, ensuring that your inflow is more than your outflow will be crucial to following your budget. Monitoring the inflow will help you to know if you will be able to cover your monthly expenses, particularly if your business has long periods of time between the inflow of money.

It is also a good idea to be a little more conservative when setting up your budget. You can do this by overstating some of your expenses, along with anticipating your revenue to be lower. This is a good strategy to ensure that your cash flow will be enough to cover your expenses. Money saving ideas is a good choice as well, such as lower phone plans or less expensive office furniture, etc.

If you can, set aside a cushion of cash. Having a stash of cash will help any small business with both success and threats to its survival. Of course trimming expenses is a good way of adding cash, but if there is any extra, it is a good idea to put it away. If your budget allows for it, earmark a certain amount of money and put it into a money market account. This money may come in handy if your taxes were higher than anticipated or an unanticipated bill is received.
Again, ensure that you are checking your budget every month, if not more often. Examining your cash flow will ensure that you are away of what available funds you have and need. If you are adjusting your budget as you go, then this will help to provide a cushion should you have any overruns in your budget. Of course saving any extra for such occurrences is also a good idea.

Last, your budget should help to restrain you from impulse purchases rather than constraining you to pay for what you should be paying. Setting up and maintaining a budget is a good discipline tool as well as ensuring that you are reviewing it for any adjustments needed.

If money is tight, set a goal to have three months worth of expenses saved up within the next twenty-four months. That will give you time to slowly contribute to the account each month. Once your cash flow has picked up, you can then make a new goal of building your emergency account to hold another three months worth of expenses.

Having a rainy day fund is more than just a cushion ready to protect the business when disaster strikes. Think of it also as your reason to take more calculated risks. Whereas before you may have thought better of doing something “outside the box”, with a financial “just in case” backup, you have the freedom to make smart business growth choices that don’t come with a 100% guarantee. As many successful business owners will tell you, it’s the risks you take that could very well bring your business to the next level.

Yet another reason for your business to have a rainy day fund is that having a ready source of cash can help you take advantage of business opportunities you otherwise may not have been able to afford. Seasoned business owners know that not all business decisions and opportunities are months in the making. You might find your product supplier over-ordered and is selling pallet-sized shipments at a 30% discount, or maybe a large and well-known mail order catalog has selected your product for inclusion, but there is a $2,000 placement fee. The situations are endless, but unless you have a way of getting “fast cash”, you could very well miss out on opportunities that could have done wonders to skyrocket your business.

Starting your rainy day fund is easy: just take a look at your financial statements to figure out your average business expenses per month. Then, figure out how much you can reasonably contribute to the fund until it has enough to cover three to six months worth of operating expenses. If you come to the conclusion that you simply don’t have any leftover money to contribute, then look again and see what expenses you can cut out. Are you over-paying on shipping? Do you really need that fresh-from-Starbucks coffee every morning (ever hear of the latte factor?) Even if you can scrape together $25 a week, that’s better than nothing and you will find that once you start it, contributing to your rainy day fund is easier than you thought!

This takes into account your sales (Money In), your expenses (Money Out), and your profits (Balance). If you’re a small one-man business, you may find that this is more than enough for your needs. And because Excel allows you to use its auto-sum feature, it will keep a running balance for you as you input any new figures. Yet if you find that you need to keep track of more information than Excel or any other similar chart program can manage, it’s probably time to start looking at more advanced alternatives.

Cost vs. Need
Of course, one of the things you should take into account first before updating your invoicing and accounts system is its cost-effectiveness. If it’s not going to offer you much more than what you currently have (whether that’s Excel or similar), then it’s probably not worth the extra outlay.

However, if it’s going to save you valuable man-hours, which can be spent marketing your business or attracting new customers, then it’s definitely worth the financial outlay. Better still, if you use an accountant or a part-time administrator to do your accounts for you, and the new software enables them to be completed in half the time, again it’s saving you money. So make sure you take the time to look at how much it would cost to upgrade, and how much you would save by doing so. This should then enable you to make a final decision.

Options to Choose From
Once you’ve decided that you definitely want, or need, to upgrade your current system, the next thing to do is decide what software you want to go for. There are literally thousands on the market, and all offer benefits over each other, as well as disadvantages. So, once again, take the time to look at what you need it for, and then narrow your search down to include just the software that will meet your specific needs. You can read more here about [ur=http://www.gowholesale.com/news/view/Choosing_Accounting_Software_For_Your_Businessl]choosing accounting software[/url].

Some excellent options include NetSuite, Microsoft Office Accounting Professional 2008, QuickBooks and Simply Accounting by Sage. They all offer unique selling points, so make sure you pick the right one for you, and your accounts will soon be running themselves.

I hear the following from small business owners every day:
"It doesn’t matter. I get to write it off."
"You can’t operate in this industry without a big line of credit."
"I need a corporate credit card to take my customers out to lunch."
"You have to spend money to make money."

All of these arguments are quite superficial and speak more to our penchant for overspending than anything else.

The first statement, "It’s a write off…" is the most tenacious argument of the lot. Many small business owners think that because something is tax-deductible, it’s free. If you look at it on paper, however, you will see the foolishness of the premise. Let’s say, for example, that you spent $1,000 in interest on a loan. The $1,000 is certainly deductible from your income. At a 25% corporate tax rate, this would give you $250 in tax savings. But you still had to fork over $1,000! You are still out of pocket by the difference, or $750.

It’s critical to get a grip on your debt picture and how much interest you are paying. This will help you plan and grow more effectively in the future.

Understanding Debt Service

Debt service represents the amount of money it costs a business to maintain or "service" its debt. It includes both interest and principal payments required for a company to remain on-side with its lenders’ covenants or agreements.

Some of your debt may require interest-only payments while some might be a blend of interest and principal repayments.

The purpose of incurring debt in any business (both the corner store and General Motors) is to generate more revenue. This is called leverage. The theory is that with more capital available to a business, it can buy more equipment or invest in more promotional activities in order to bring more customers in the door. In many cases however, a lack of understanding of these principles hides the fact that debt is simply being used to prolong the agony of an unprofitable business. Understanding your total debt service will help you to determine whether your indebtedness is helping you earn revenues.

Another useful measure of your company’s debt is to look at the overall cost of borrowing. Comparing the blended cost of borrowing over time tells you whether it is becoming more or less expensive for the company to acquire capital.

You may have financing from several different sources:

* Bank loans
* Lines of credit
* Credit cards
* Capital leases
* Suppliers
* The government

It’s important to understand the total cost of your debt from all sources. You can do this by calculating a blended interest rate from all of your current debt.

Let’s look at an example:

A company has several different sources of financing:

* A bank loan with a current balance of $14,912 and an interest rate of 8.5%
* A capital lease for computer equipment. Balance $5,387. Interest rate 11.4%
* Payroll arrears owed to the government in the amount of $6,754. Interest rate per the statements is 10%
* A corporate credit card with a balance of $12,769. Interest rate 18.5%

In order to calculate the blended cost of debt, we simply divide each interest rate by the proportion of its related debt to the total debt. In the above example, it would look like this:

Type | Amount | % of Total | Interest Rate | Blended
Bank loan | 14,912 | 37.5 | 8.5 | 3.2
Capital lease | 5,387 | 13.5 | 11.4 | 1.5
Payroll arrears | 6,754 | 17.0 | 10.0 | 1.7
Credit card | 12,769 | 32.0 | 18.5 | 5.9
Total | 39,822 | 100.0 | 12.3

The weighted average cost of debt is 12.3% in this example. So, what does this tell us? Not much, by itself. It’s only when we look at the weighted average cost of debt over time that we are able to see if our interest rates are going up or down. If our blended rate is going up, for example, it could mean that we are beginning to have solvency issues. It means that our newer debt is at a higher rate than our existing debt. Lenders may be more hesitant to lend to us and we may be seeking financing from more unconventional (and more expensive) sources.

The Danger of Leverage

Many "Make Millions with Your Small Business" books will talk about leverage and "good" debt versus "bad" debt. They argue that it takes money to make money and that virtually all companies borrow. "Good" debt (they say) allows you to leverage your funds to earn more income. For example, if you can attract $50,000 worth of new business by buying a $30,000 machine on credit, you would be farther ahead to do so.

What these "gurus" don’t tell you is this simple fact:

DEBT = RISK

Not exactly rocket science, I grant you, but critical information to keep in mind, nonetheless. In our above example, what happens if you don’t get the increase in business you were expecting? The debt is still there. You can’t tell the bank "Sorry, I can’t pay you back until I get this new business in the door." When your business is indebted to a bank, mortgage company or other lender, there is the risk of default and of the debt being called and company assets seized. Think of it this way: it’s only companies that have debt that declare bankruptcy. If you didn’t have any debt and you wanted to wind up your company, you would simply close the doors.

Another danger that many small business owners don’t think about is that many lenders require the personal guarantees of company owners and may even require you to put up your home as security. Now, not only are your business assets at risk but everything you own personally as well. Clearly, this increases the risk of entering into credit agreements.

I’m certainly not recommending that you never borrow money. However, you need to understand the following every time you engage in credit:

* What is the purpose of this borrowing?
* Am I getting the best interest rate possible?
* What does the revised stream of cash flows look like with the new debt?
* Do I have a plan to retire this debt?
* Do I have to pledge any personal assets to get this credit?

Once you have satisfied yourself that you have done the required background work to understand your business strategy, then you can enter into the agreement with confidence.

In this article, we will look at some ways in which you can trim your shipping costs and make your business a lot more profitable.

* Save A Penny, Save A Pound. Remember that shipping is not all about the carrier, the postage, or even the weight. If you are selling a lot of items, then odds are you are spending a lot of money each year on smaller, unnoticed items such as packaging materials.

Look for ways in which you can reduce the costs of these materials, including tape, Styrofoam, and labels. Buying wholesale or bulk is a great start; and of course, you can always go directly to the source through a shipping materials website.

* Use The Right Box Sizes! If you sell a large variety of products in terms of size, then make sure that you understand that size does matter in terms of shipping costs. There are a wide range of box and envelope sizes out there, and the U.S. postal service provides many of them for free.

Using the right size box or envelope will mean less cost for individual items shipped. It will also mean using a lot less of the smaller materials that add up, discussed in point number one!

* Shop Around For A Carrier. Of course, the biggest expense you will incur when it comes to shipping will be in the carrier services you use. You should undergo an analysis of your carrier’s costs every month and compare them to what the competition is offering.

There are plenty of options when it comes to delivering your packages, from shared loads to bus lines and of course the good old postal service. The most cost efficient means will depend on how many packages you want to send, and how much they will weigh.

Remember that it might work out much cheaper, per package, to send a bunch out at once, even though the total price itself may seem shockingly high. Take the time to do the math!

Shipping costs are a critical concern for any business that sells products to a diverse marketplace. Make sure that you invest the time needed in order to ensure you are keeping this costly part of your business as inexpensive as possible.

If you haven’t heard of bootstrapping, it’s fairly straightforward – think of it as the equivalent of making your business successful with very little cost involved. In this respect, it could be seen as “pulling up your socks, strapping on your boots and getting on with it”. It’s a particularly effective way of saving money if your business is either a sole proprietorship or some kind of contractor, as it allows you to both create and manage your income yourself.

With over 18 million small businesses in the US alone, the competition from this figure alone means that any kind of savings you can make by bootstrapping will be worth it. You can put the extra money to use making your business a success, as well as keeping funds stored for downtimes. So what are the best ways for bootstrapping your company? Simple – reduce your outgoings and maximize your incomings.

Your Office
Unless you’re in the PR side of business and you feel you need to make a huge statement with your offices, this is the first place you can make a difference. If your business is primarily online, you can work from home and use a room there as an office. All you need is a computer and a phone anyway, so who’s to know where you’re working from? And if a client wants a meeting, take him or her out to lunch.

Office Equipment
Now that your bootstrapping is saving you office rent, the next step is to continue these savings, and where better to start than your office? You probably don’t need the latest mega-computer for example, so get a decent second-hand laptop or desktop computer, and save a couple of hundred dollars right there. You can also find companies that will sell refurbished phone systems, so even if you have 2-3 employees, it won’t cost you much to have a fully functioning phone and communication system installed.

Employees
If your business needs more than yourself or your partner to make it efficient, then having a payroll is obviously going to affect your finances. However, this is where bootstrapping can make a major difference, if done right. Instead of offering a standard salary, why not offer stock in your company as well as a token wage? You’ll find not everyone will be willing to do this, but there are always some that will. Use Facebook as an example – 3 months after that college experiment started, the company got a $246 million investment from Microsoft, making the early employees very rich indeed.

You can also hire college students. They’re clamoring for job experience towards their chosen area of study, and some may even work unpaid. For more technical jobs like graphic/web design or IT work, you can hire graphic design or IT students to help you out with those specific projects. For more on this, read Hiring Cheap Help – How Student Contractors Can Benefit Your Business .

Pay Your Bills on Time
Although it might sound strange paying money out when you’re looking at saving money, paying your bills on time can be an excellent way of saving in the long run. Because you won’t have to pay late payment penalties or interest fees, you’ll be making savings every month, which you can plow into the company.

There are many ways that you can use bootstrapping techniques – a lot depends on your company and what your selling or providing. But the ones mentioned here will work for any business, and can make the difference between a successful first year, and not being around to see the second.

One of the most important parts of owning and operating a home office is purchasing office supplies. It is surprising how much money can quickly be spent on pens, paper, lamps, desks, and other home office necessities.

Here are some tips on finding high quality, bargain office supplies:

1. Look for the office supply store sales. Each Sunday, most newspapers contain circulars for major office supply stores. Check these out for great deals on all sorts of supplies you need. Beware! Entrepreneurs can spend hundreds in a large office supply retail store in a matter of minutes.

2. Check eBay or other online auction web sites. Some supplies, such as toner cartridges and computer equipment, are pricey even on sale. This is when you can really save a lot by bidding on Internet auctions. The best part of Internet auction sites is that you can find almost anything there – the selection is much greater than the local office supply store. Remember to check the sellers’ feedback to make sure you’re buying from a reputable seller.

3. Watch for "going out of business" sales. Sadly enough, there are retailers that go out of business. This is when you can find best buys. These retailers need not be office supply specialty stores – larger department stores might sell furnishings or perhaps boxes of paper. If you can find a small stationery store that is going out of business, you’ve hit the jackpot on smaller office supplies.

4. For larger items, check yard and rummage sales. You might be surprised to find the perfect desk or chair for your home office at the neighborhood yard sale. Sometimes the items with the most character are found at rummage sales; these can really add ambiance to your home office.

5. Buy in bulk. As a small business owner, you should be eligible to join wholesale clubs. Sam’s Club, Costco, and other wholesale clubs have great deals on bulk office supplies. The cost of membership will usually pay for itself with regular purchases. You’ll find everything you need for a successful home office at wholesale clubs – even coffee and muffins for your clients who drop in.

The easiest way to find affordable office supplies is to keep your eyes open. Communicate with other small business owners in your community. You may even make some great friends in your quest.