Building A Business Budget
As a creative business owner or entrepreneur, without a budget, it is hard to know how much you are earning, let alone spending. How can you keep track of revenue and expenditure without some kind of budget in place? The truth of the matter is you cannot! By creating a budget and then referring to it on a regular basis, you can measure and control your actual performance against expectations and ensure financial success.
So where do you start?
How much money are you currently bringing in at the moment? This will help you understand your current financial situation. Start with your sales figure and then add any specialised income on top of that.
Focus on how much it costs to run your business. Gauging your fixed costs, i.e. the non-changeable ones, are the simplest as they don’t generally alter when the business grows. Look at expenses such as rent, insurance, utilities, the internet, staffing and telephone costs. Many of the charges may replicate themselves throughout the year.
Focus on expenses and revenue
Now, look at your variable expenses, the costs which will change as your business grows. Take into account the stock, commission and other expenses your business may encounter.
A quality budget will look at the overview of all your financial activities on a month to month basis and will ultimately include assets, revenue, liabilities, equity, expenses and large capital purchases.
Plan your budget for the next twelve months and then if successful, use it as a base for the next year. As you become more familiar with your financials, you will be able to note any seasonal factors and trends and start to identify whey they occurred.
Be as clear as possible
When you are preparing your budget, be clear about how you have determined any figure you write down. Take special or extended notes if necessary. This will help you to analyse any variations that may have happened during the year. If there is a large difference between the budget and the actual costs, then you should assess it routinely for major flaws or discrepancies.
Monitor it regularly and manage your business actively to achieve any financial and strategic objectives. It is a lot to get your head around in the early stages, but like any marketing or sales plan, it is an essential part of running a business. After all, how can you plan for something if you aren’t even sure what is going to happen in your financial future?
If you are in the market for pricing advice, strategic business advice or business planning, then don’t hesitate to give us a call. As a small business ourselves, we are in a great position to advise you how best to move forward or plan for future growth.