As individuals, we create a budget from our earnings and do our best to make that budget work for us in meeting our needs and that of our family. This is to ensure that we will be able to cover our expenditures and be able to save, even just a little, for contingencies and life savings.
Small and large-scale businesses work on a business budget in order to have a specific overview of the business’s finances, either for a short-term period or for the whole calendar or fiscal year of the business operations. Below are some of the steps that a business owner should take in order to create a business budget that is right for your needs.
1. Get all your sources of income.
It is important to consolidate all your sources of income when creating a business budget. Ordinarily, there is only one source of income for a business which could be revenue from goods sold or services rendered. If there are any other sources other than the primary business income, then that should all be accounted for in order to see how much your possible and targeted earnings for the period would be.
2. Identify all your business’s fixed costs.
At the onset, there are constant expenditures for the business that should be all accounted for, and these are budgeted against your income for the period. If you are a new business, projected costs should be in place and totaled and compared to the projected income for budgeting purposes.
3. Identify variable costs and expenses.
There may be other expenses involved that could come up during the course of business operations and these should also be accounted for so as to have a clear picture of what the business’s financial obligations are for the period. If need be, a contingency plan should also be in place for these variable expenditures that could come up in the course of business operations.
4. Forecast your one-off spends.
It is also important to consider possible one-off spends for the business which may include acquisition of new equipment, a probable purchase of a fixed asset such as land or building for the business, among other things. It is important for the business owner to foresee these one-off expenses to help source funding for these in the future during the course of operating the business. You would not want to end up paying for something that will not be covered by the source of income in the long run.
5. Consider industry trends and seasonal sales.
In creating your business budget, a business owner should be in the know of the current business or industry trends of the business you are in. From here, you will be able to predict possible seasonal months as to where income may be high or low. It is essential that these variable trends are incorporated into the business budget for proper forecasting of sales and the possibility of rising variable costs to the business for a certain period.
6. Consolidate your data.
Once you have all your data in one place, you will be able to see a better picture of your potential income and expenditures for any given period for your business. The data will help in handing down sound business decisions based on both facts and projected figures for a smoother flow of business operations for financial stability.
7. Stick to your business budget.
Having a business budget enables management to hand down sound calls and decisions for the long-term financial goals of the business. Stick to the budget and adjust as necessary to eventually achieve your goals of financial stability for the business.