Proper financial management is a determining factor for a successful business. It entails bookkeeping, projections, budgeting, and financial statements which constitute the foundation to make efficient business decisions. 

Reviewing your finances tells you if you are making a profit. And It can allow you to get the tools you need for business growth, diversify product lines, and reach new markets. This is because managing your finances helps you determine which products, services, or markets are profitable. 

To start the financial management process of your business, you need to set your budget. A budget is an overview of your business’ finances, outlining key information on the current state of your finances and your long-term financial goals. 

Here are some general guidelines that will help you with your financial management process and setting your budget:

1. Estimate the revenues of your business.

To be realistic and to avoid overestimating your revenues, analyze previously recorded revenue to get a solid idea about your income. The past figures would act only as a reference point.

2. Determine your fixed costs

They are expenses that stay the same over time; i.e.: they don’t change according to how much you make, such as rent and payrolls.

While reviewing your expenses, you can see which costs have stayed the same from month to month and you can categorize them as your business's fixed costs.

Determine your Variable Costs

They are expenses that will vary each month based on the business performance, however, they are always present. E.g.: cost of goods sold and sales commissions. 

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