How To Create A Budget Plan For A Business
What is a budget plan? Basically, it’s a detailed strategy that outlines where your business will spend money either on a monthly or annual basis. This budget will help to forecast what money you expect to earn, where those revenues will be spent and will let you see the difference between your plan and the actuality.
See how to create a budget plan for a business here…
Why is it important to have a budget plan?
This overview of your costs and expenses is an efficient guide for key information relating to the current state of your business finances, and your long-term financial goals. You’ll need this budget in place to help you make sound financial decisions, identify where to increase sales or cut back on spending, and get funding to allow your business to grow.
Planning a budget for a business
There are several elements to a good budget and these include:
- Predicted sources of revenue – this is the money expected from sales of goods or services and can be based on the previous year’s takings, or on marketplace averages for a start-up business.
- Fixed costs – such as bank fees, insurance, rent, utilities and any other costs that are regular and consistent.
- Variable costs – anything related to the purchase or production of your product such as materials, packaging and shipping. Bear in mind salaries may come under fixed or variable costs.
- One-off costs – these could be related to moving premises or the purchase of equipment or software. Start-up costs would be included here.
- Cash flow – this is all monies moving in and out of your business and should be monitored on a weekly basis.
- Profit – after all expenses have been deducted this is your profit. Your plan will be based on projected revenue, expenses, and costs of good sold.
- A statement or summary balance – create a spreadsheet that lists income, budget, actual, and profit or loss figures. This will give you a snapshot of your budget ongoing if you link totals on the summary page to your other budget tabs.
How to prepare a budget plan for a company
Company budget planning varies according to the type of industry and business. See examples here:
Budgeting can be more complex as there are no existing models to work from so additional research needs to be done into salaries, rent, and marketing costs. Money should be also set aside for professional advisors.
Ensure the volume of your inventory isn’t greater than product demand, and potential stocking up on inventory needs to be factored in. Costs of storage and disposal may also need to be included.
Shipping and import/export duties can have a huge impact, and you need to have funds available for web design and advertising to market your goods.
As a non-consistent business budgeting is vital giving you an accurate future cash flow. Use the slow season to plan for the following year, negotiating and cutting costs as opportunities arise.
How to make a business budget plan recap
Snippets to take away:
- Set your business goals – earn more income than is spent on operating costs
- Determine your objectives – consider financing, employees, location, management, and revenues
- Achieve financial goals – prepare short-term, mid-term, and long-term categories
Outsource a Virtual Chief Financial Officer
Virtual CFO services will help with all aspects of business planning. A Virtual CFO (Chief Financial Officer) will ensure that a clear picture is provided for setting out your goals, planning your sales, marketing, and financial objectives. This professional business plan generated by your virtual CFO will impress investors and deliver accurate information on your current financial position, and what resources you’ll use to expand in the next five years.