How to Accurately Predict Your Monthly Business Expenses

As a former business advisor, I spent hours guiding owners in how to accurately predict monthly business expenses. I explained to these small business owners that one way to make sure that you business is successful is to have as strong a grasp on the money going out, as they do on the money coming in.

Past Records

The main items that you need when trying to accurately predict your monthly business expenses are usually going to be buried in a filing cabinet somewhere around your office, shop, or maybe even your home. You need as many of your past utility bills, tax forms, payroll reports, and any other type of report or receipt that you might have that will give you a history of monthly expenditures for the last five years.

Preparation

All of your utility bills should be stacked in one pile, all of your expenditure reports in another, and so on. Make sure that you have these stacked in order from the newest on top to the oldest on the bottom. This way they will be in the order that you will need them in to predict your monthly expenses.

Record Sheet

Create a spreadsheet that lists each of the categories on the side and all twelve months on the top, with one page for each year. If you are missing a utility bill, for example, call the utility company for the record and explain that you are a small business owner that is trying to accurately predict your monthly expenses.

Constant Numbers

Once you have all of your numbers in order, compare each month to the corresponding month from past years. Chances are good that you will find that most of the months are similar form year to year. These are your constant numbers. Property taxes, and utilities might go up slightly, but remain fairly constant.

Fluctuating Numbers

To accurately predict your monthly business expenses, you need to know what your fluctuating numbers are. These are the numbers that are considerably different from year to year. Major fluctuations need to be explained.

Remembering

Whenever you see a significant drop or increase in the history of expenditures for a month, try to remember what might have caused it. For example, construction outside of your store one month might cause for some odd monthly totals.

Toss the Outliers

The next thing that you need to do is to throw out the outliers. Outliers are the monthly expenditures where something really original happened that probably will never happen again. You need to throw out all of the figures that have a very small chance of ever happening again (drops or increases caused by construction, disasters, etc).

Averaging

Take the mathematical average of each January, February, and so on for each report that you have in front of you that you did not toss for being an outlier. Add about 1 percent to this total to figure in for inflationary costs. You have now accurately predicted your monthly business expenditures.