A successful business owner is one who plans in advance how best to strategically use their business’s funds to ensure that the company runs smoothly for the given budget period. Small businesses can often get away with having just one budget to cover all of the company’s anticipated expenses. Large businesses, however, will more often than not set up multiple budgets for different departments (i.e. a sales budget, marketing budget, etc.)
When planning your budget, make sure to address the following key items:
Cash-flow: Figure out where your business’s cash position will be in the upcoming months and then use those benchmarks to determine any difficulties your business might be having along the way to achieving these goals.
Costs: These come in three forms – fixed (rent, rates, salaries), variable (raw materials, overtime), and one-off capital (need for a computer, new work-space, equipment). It’s best to prepare for all of these items by looking at last year’s records, anticipating what you might need and then contacting your vendor for updated costs.
Revenue: More or less a forecast based on sales history and how effective you think your team’s efforts will be during the upcoming budget periods. Setting this up will allow you to put together projected profits and analyze key ratios as you move through the budget period.
Focusing on these three items during your planning stages will help you to more effectively determine what areas of your business deserve a greater or lesser portion of your overall budget.