Fact: A company budget is a detailed analytic representation of how and when a company expects to spend money, within a specific time period. It’s crucial to know exactly where your money is going, and what it’s going to.
It’s safe to say that in business, you have to spend money to make money. But it’s also wise to have a budget in place and actually stick to it. Why? Because:
- Without a budget it’s easy to run out of money. No money = No Business.
- Without a budget you won’t really know if you are making any money.
- Without a budget, an unplanned purchase can damage cashflow for months.
- Without a budget, it’s harder for your business to consistently grow.
Whether you’re looking at expanding a department or trimming the fat in another, it’s crucial to know where your abilities to do so will lie. Creating a financial roadmap will insure your company stays on the right path and help eliminate wasted capital that would be better used in other areas like future growth.
So, Where Do You Start?
Drafting up a budget is a great way to turn your business dreams into a successful reality. Victor Butcher, of Butcher Financial Services states, “You need the roadmap to understand where you’re going with your business.” without one, you will hope you’re going in the right direction, but in all honesty, you don’t know.
A typical budget will include:
Income – consists of product and service sales, receivable accounts and any other source of income you may have.
Expenses – includes everything you actually spend on your business: supplies, insurance, travel expenses, utilities, payroll, etc.
Profit – this is income minus your expenses.
So, lets break down the bottom line. Here are a few ways you can use your budget to indicate the above:
Labor and/or material funds
Total cost of operations
Revenue necessary to support your business
A realistic estimate of your expected profits
Knowing the detailed aspects of each will help you figure out whether you have leftover money for capital expenses for improvements.
You can also use the information above to adjust your expectations going forward. We have found, using a 12-month budget will help you update your actual expenditures and revenues, each month. Keeping you on target.
With A Little Help From Our Friends
Microsoft offers a series of downloadable budget templates, for free. They include a rolling budget for small business, an expense budget, as well as an annual operating budget for a services business. It really doesn’t get much easier than that!
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