Budgeting is the basis for all business success. It helps with both planning and control of the finances of the business. If there is no control over spending, planning is futile and if there is no planning there are no business objectives to achieve.
A budget is a plan to:
- control the finances of the business
- ensure that the business can fund its current commitments
- enable the business to meet it objectives and make confident financial decisions; and
- make sure that the business has money for future projects.
The benefits of budgeting should never be underestimated when running a business:
- budgeting estimates revenue, plans expenditure and restricts any spending that is not part of the plan
- budgeting ensures that money is allocated to those things that support the strategic objectives of the business
- a well communicated budget helps everyone understand the priorities of the business
- the process of creating a budget provides opportunities to involve staff, resulting in them sharing the organisation’s vision.
If you’re running your business without a proper budget you may find you’re actually just running around in circles and not meeting your long-term goals. By taking the time now to set a budget, you will free up time in the future and give yourself the best chance of achieving the rewards you want for your hard work. Using a profit & loss statements can tell you at a glance whether you’re making money or losing it. To do that, you’ll subtract your expenses from your income. You can find templates through Microsoft Office and find out more information on accounting here.
Income (revenue): How much money are you generating from sales of your products or services? It helps to break these into:
Recurring income: regular and reliable revenue from client retainers and contract work
Expected income: predictions of future income. This is a forecast of what your business is likely to earn.
Expenses (costs): How much money are you spending on business costs such as staff, raw materials and marketing? As with income, it helps to break these into:
Recurring expenditure: your monthly payments for rent, utilities, payroll and so on
Sundry costs: occasional payments for office supplies, client entertainment expenses and other items
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