Budgeting is an act of guessing—careful, researched guessing, but guessing nonetheless. When you are budgeting for your home business, it is important to look at expenses and revenue as it is now, but we also have to anticipate the areas where costs will go up. In an unstable economy like the one we are experiencing now, anticipating cost increases can be a challenge. There are a couple different ways you can work to anticipate and prepare for where your costs will be a few months or a year from now…
If you have a history of budgeting or have been operating your business for a few years, you should have some historical data to reference as you prepare to budget for the future. If you see that your paper prices, for example, have gone up a little every year, you can probably anticipate that they will continue to rise. Using past data and past bookkeeping to predict what the rising costs might look like in the future is one good way of anticipating changes. Of course, you need the financial data in order to do this.
You can also make an educated guess using percentages or do some research. Often trade magazines and articles can provide you with some predictions about rising costs. They may say something like, “fuel costs are expected to go up 20% in the next 12 months” and this can help you to use that percentage to update your budgeting. You may choose to add 20% to everything in your budget that may be affected by the fuel prices or you may choose to use 20% as an overall figure for anticipating rising costs.
As long as you realize that your budget is not a declaration or a promise, you can work to make it as user-friendly and accurate as possible and this includes making adjustments for rising costs. By anticipating rising costs, you can also figure out how to increase your income to compensate!