Easy Steps to Create a Budget for Your Small Business
What’s the point of a budget?
A budget done correctly is the most accurate tool for analyzing and monitoring your finances imaginable. I am writing this article from my experience and as a help to others.
How I hate budgets!
I hated the figures; I had some excuses when asked to create the budget for my business. I always pretended that I didn’t have the time to do it. I was running my company for many years without a budget. When I looked at my bank records, I used to think I was alright because I had money. The time went on like that then I started putting some figures together for the budget. But I always missed the comparison of the actuals of income and expenditure against the budgeted number.
How does the budget help a business?
The budget sets your goal in the common term because it is projected using expected income and expenditure. When you select the budget almost accurately will be able to measure and decide whether you are reaching your goal. Another point is you will know your mistakes in the spending pattern. You have to take your income and expenditure totals and compare them with the projections. When you calculate the sums, you will know whether you have overspent or underspent. That is the biggest reason a budget is crucial for the business’s survival. Then if you want to apply for a loan, the funding is needed. Any lender will not consider your application without knowing the company’s financial status.
Forecast for a quarter.
In this method, you must collect the figures for a quarter from the previous year’s accounts. I have got the reports done by professionals. Once you have taken the statistics, increase most numbers by a certain percentage according to the inflation. Then calculate the quarterly actuals and compare them with the budgeted amounts. Once you have prepared data, you must do this task every quarter. It is the method I have used to do, and now I have explained it here for you as well.
The benefits of comparing the figures.
I have been comparing the figures every month and have been able to find out the area of over expenditure. That helped me to bring the finances under control on the expenditure side. Then I looked at my income and found out it had fallen; I started concentrating on both and nearly achieved my goal by the end of the year. I know my weakness of spending money on unnecessary things, which I was able to cut down.
Use of accounting software
If you are very busy with your business, it will be more comfortable and quicker to set up using accounting packages. I will mention two packages Quick Books and Sage Line 50; both are easier to learn. Once you have uploaded the figures, it is a matter of printing out the necessary reports as and when needed. The stories will be accurate unless you have made mistakes in initial uploads. Then you can continue using this package to extract other reports. It might be a tedious task initially, but hire a professional. But it is worth your money and time, as producing reports for your business is easy. As a result, you will be in full control of your finances. https://tinyurl.com/ycmmzc8l
Use of Excel spreadsheet
Some entrepreneurs use Microsoft Excel to create budgets, cash flow projections, and all other accounting work. It is cheap as you don’t have to spend any money to start doing the job. But have to be proficient in using the program to produce spreadsheets. The spreadsheets will have all the necessary figures as and when you enter there. It is suitable for running a small business, but work will be tedious if you grow your business.
Use of the profit and Loss account.
Financial statements are prepared at the end of the year to show the profit and loss of the company. The profit and loss account will also be used to create the projections for the following year. https://tinyurl.com/ycmmzc8l