When you want to run a business successfully, you have to devote your attention to a lot of things like collecting funds, marketing, establishing a digital presence, generating sales, paying your staff, and the list is unending. If you are wondering what is that one element that should top your priority list it is business budget.
Business budget and its importance:
Before we learn how to prepare budget for a business, we must know what it means and why it is of great significance. In simple words, a business budget is basically an overview of the business’ finances. It outlines valuable information about the business’ current financial state and the long-term economic goals.
As budget plays a pivotal role while you make any financial decision, you need to tackle it right from the start. Having your budget in place will make it easier for you to manage things efficiently and make better decisions.
Step-by-step guide for beginners:
Having an accurate and detailed budget is necessary if you intend to build a sustainable, thriving business. So, today we’ll discuss all about creating a budget like a pro. Follow these straightforward, simple steps to do it yourself:
- Tally the income sources
When it comes to creating a budget, at first you have to figure out the amount of money your business brings in per month and the sources from which that money comes. Go through the ‘Profit and Loss Statement’ to have an idea about the sales figures. Then, add up all the income sources and tally them to know the total money you make on a monthly basis.
- Handle fixed costs
Once you have a grip on the income, the second step is to handle all expenses, fixed costs being the first one in the line. Fixed costs are those expenses that remain constant every month. Such costs include rent, staff payment, website hosting, utilities like phone and internet plans etc. Take help of the bank statements to review fixed disbursements, add them at one place, and you’ll have the total fixed monthly cost.
- Monitor variable expenses
Variable costs are those costs that differ from one month to another depending on the business activity and performance. Shipping and travel costs, electricity, sales commission all fall under the category of variable expenditure. So, you need to keep tallying variable expenses in the month end and soon you’ll learn how they fluctuate.
- Predict the one-time investments
Other than regular spends, there are some investments (like buying computers) that do not take place frequently. You also have to include those one-time purchases in your budget.
- Accumulate all the data together
When you have collected essential data on income sources as well as cash outflow, put everything together and you get a detailed view of where you stand financially.
If you have a clear understanding of profitability at the end of each month, you can come up with smart financial decisions. Your right solutions will enable your business to move forward even in tough times.