When tax time comes around again, do you have a good handle on what that income number should be? If you are like many people in the construction industry, you may be taken by surprise by that number, often because it’s lower than you expected, especially when you take all the business expenses into account. In order to have a better idea of how your business is doing, the answer may be paying closer attention to your budget.
You are detail-oriented about your construction projects and you may need to be just as focused on your finances. What has your money intake historically been and what are the market factors that can help you estimate future income? Is your income steady or do you have particularly busy times of year? Then, take a close look at your expenditures. Start with the ones that are fixed at the same amount each month. After that, look at all the costs that vary month to month and use past bills to get an average. Include expenses that will help your business grow, like advertising, as well as upkeep costs, like fixing broken equipment or buying new. Put this all in a spreadsheet and, most importantly, go back monthly or quarterly to compare actual numbers against your budget, adjusting your budgeted numbers as needed.
Once you are using a detailed budget, you can assess your business and make informed decisions moving forward. For instance, you may realize that to cover costs and still bring in the net amount you’d like, you need to raise your rates. Or, you can find places where costs can be trimmed so that you can build an emergency fund for unplanned business expenses. However you use the information, having an accurate budget in place will help you manage your construction business. Toffer Grant is PEX's Founder and CEO. He founded PEX in 2006 as a prepaid card solution for small businesses. His background in the prepaid industry began at Clarity Payment Solutions, where he initiated 65 prepaid card programs in consumer, corporate, and emerging verticals of the prepaid card industry.