Budgeting is essential to insure and track your business’s financial side and allows you to allocate funds for items or activities. Budgets can also help you set business goals, make sound business decisions, and get finance if required.
The first step is to create your budget and establish the items you will need to include.
Creating a time frame for your budget will be dependent on your business needs, and this can be monthly, quarterly, or yearly.
Fixed costs need to be recognised and added to your budget to allow for accuracy in knowing any fixed and reoccurring costs.
Variable costs such as utilities, prices of materials and staff wages need be configured and added to your budget. These costs are reoccurring but are not necessarily the same every month.
Your expected business income for your budgeting period allows you to get an idea of costs throughout the time frame and allow for some flexibility.
Next, you will need to prepare your budget; this should be reviewed and edited by an accountant to allow for accuracy.
Once your budget is complete, you must regularly monitor and revise your accounts to see how your business performs in terms of monetary needs.
Next, you will need to use your budget to your advantage and its full potential to assist you in making informed business decisions.
Lastly, understanding the difference between budgeting and forecasting is crucial. Your budget is planned revenue and spending costs and helps to allocate funds through your budgeting period. However, forecasting is generally more frequent, usually monthly, and predicts past and current trends in your financial statements.
Your business’s financial health should be focussed on with high priority as this can ultimately make or break the success of your business.