A budget is a plan of revenue and expenditure allowing the business to allocate funds for specific purposes known in advance. Business budgeting helps make sure you aren’t spending too much in certain areas and helps you reach your sales targets.
To help your business succeed My Great Bookkeeper works with you to prepare a yearly budget. This budget along with your Balance Sheet and Profit and Loss is used to prepare a cashflow forecast. Every business needs good cashflow to succeed and effective business budgeting helps immensely with this.
- How much does the business anticipate earning each month?
- What are the anticipated costs directly associated with the sale?
- What will the electricity, rent, telephone, leases, and staff expenses be, and what month will you need to pay them?
- When you take your costs and expenses away from your income what is the bottom line?
These key budgeted figures help you acknowledge what the business needs to stay within its boundaries so you don’t overspend.
Too often we see businesses not making the profits they should. Wages & Salaries drawn are exceptionally high, or the business owners splurge on assets like expensive motor vehicles before their business is in a position to handle the capital acquisition purchase. This can affect the long-term prospects for your business.
If the business has been trading for the past year, it can be less time-consuming to produce a small business budget by looking at a previous profit and lost that shows transactions in the month they incurred. You can do your budget in excel, keeping notes on how you came up with your figures. You can upload the budget into your accounting program so it can compare actuals with the budget to monitor your progress.