Business Budgeting – Prepare a Business Budget
When writing your business plan, you will need to include your forecast revenue and expenses. To help with business forecasting and setting business benchmarks you can use to measure your success, you will need to carry out some business budgeting. But why prepare a business budget? What are the pros and cons for completing business budgets?
- Provides business owners with a practical budgeting tool
- Helps a business monitor its expenses, and adjust their needs accordingly to their expected performance
- Allows a business to plan for capital expenditure on plant equipment and machinery
- Assists with obtaining business loans from relevant institutions
- Helps with planning business growth
- Takes time to prepare a detailed business budget
- Most people don’t use a budget so it becomes an annual event that once done, is forgotten about
- Often, the predicated income and expenses are not realistic enough
To help overcome some of these obstacles, we have provided you with a free microsoft excel budget spreadsheet. In this budget spreadsheet, you can enter your expenses and income per category. Using this excel spreadsheet, you can also enter your actual results and see the difference o n a month-by-month basis..
You will be amazed at how empowering this can be, once you start doing this. As you produce your P&L report (either from your bookkeeper, accountant, or own financial software) for each month, enter the data in the appropriate categories of the budget. As you do, the difference will show in either red or black.
Find out more on Profit and Loss statements, and how to create your own using a free profit and loss template.
Using the free budget spreadsheet template, it is the RED numbers that you should be concerned with. The higher these numbers are, the more attention you must pay to the particular category. For example, your expenses one month for stationary were $458.99, and your budget was $450. The result would be a -$8.99 difference. You wouldn’t worry about this.
However, in the same month, your staff wages were $5680, and your budgeted amount was $4700, leaving you with a difference of -$980. This area would need to be investigated, so you are aware of this large difference. If there was any way you could avoid it happening again, this investigation would show you.
Setting up a budget takes time. That is one of the main reasons why businesses never bother with doing it. We have set up a template to save you hours both in the setting up of the budget, and in how you can use it throughout the financial year. In this file you will be able to set your budget for each month, and it will produce Year-to-Date figures, a basic Year-to-Date Profit and Loss statement (similar to Steve’s), and graphical charts about your best performing products. Download your Budget Template here.
Every aspect of the business needs to be included in the budget. All of your expenses, which will include your promotion strategies, are included. Your revenue can be broken down into product lines, or you can simply put a figure in for total sales. Often, the categories that a business uses in their Profit and Loss statements serve as the items to include in your budget.
Top Shelf Groceries Budget
Take a look at Steve’s budget for Top Shelf Groceries, before you write you own. He has incorporated his expenses for his promotions as well as his everyday expenses into his budget.
Have a go at preparing your own budget. If you do have financial history, then gather that and use it to make an educated guess for your future earnings.
Keep in mind that a business budget is not a hard-and-fast business tool. It is important to work toward a budget, but it is a guide. Get started today with the free microsoft excel business budget spreadsheet.
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