How to Create a Business Budget for Small Business – Guide
To budget, you need to know what you want your business to achieve. This can be broken down into short-term and long-term goals. Short-term goals are specific and immediate, such as paying off debt or purchasing new equipment. Long-term goals are more long-term and abstract, such as saving on marketing spend. Knowing these goals will help you determine how much money to allocate to each area of your business in order to achieve them.
They should be practical about the goals you’ve set and based solely on your company’s ability to spend and save. Once you’ve set your goals, you can create an effective, foolproof budget by following these steps:
- Create a rough budget and then realize you need more money to run your business.
- Your budget should be such that you can increase your sales and profits enough as your business expands to meet your growing expenses.
Your estimated revenue
Your income is the total amount of money you bring in through sales or other means. This includes any money you earn from your own efforts, as well as any revenue generated by your business. Your income statement shows how much money you brought in during a specific period of time. ..
Your fixed costs
These are the costs that you know will always be there, regardless of your income.
Your variable costs
Variable costs can include raw materials, inventory, production, packaging or shipping costs. Other variable costs may include sales commission, credit card fees, and travel. A clear budget plan outlines what you expect to spend on all these costs. ..
Fixed costs, such as wages, can fall into one of two categories: fixed or variable. Fixed costs are always associated with a certain activity or product, while variable costs are determined by the amount of time or money spent on a project. To keep track of your different salary costs, record them in the right budget area.
Your unique costs
One-time costs are unique to your company and can be quite expensive. These costs include moving offices, equipment, furniture and software, as well as other costs related to launch and research.
your cash flow
A business with positive cash flow is able to pay its bills and continue to operate. Negative cash flow, on the other hand, means that a business is spending more money than it is taking in. This can lead to bankruptcy or other financial problems. ..
Cash flow is essential to every business. Make sure to monitor it weekly or at least monthly in order to ensure you have enough money to pay your suppliers. ..
your profit
Profit is what you take home after subtracting your expenses from your income. A growing business means a growing profit. Here, you will plan how much profit you plan to make based on your projected revenue, expenses, and cost of goods sold. If the difference between income and expenses (aka “profit margins”) isn’t where you’d like it to be, you need to rethink the cost of goods sold and consider raising prices.
A budget calculator
Budgeting can seem like a daunting task, but using a budget calculator can make it much easier. By creating a summary page with one row for each of the budget categories, you’ll be able to see where you stand and plan accordingly.
The budget for the next fiscal year is $10,000. Category Amount Budgeted
- Rent $1,500
- Utilities $200
- Food $500
- Transportation $300
- Entertainment $200
- Personal Care $100
- Other Expenses (such as taxes) $1,000 ..
Final note
This guide is designed to help small business owners create a budget for their business. By following this guide, you can save money and improve your business.
