When you are planning for your business’s future, many people forget to make a plan for funds. Budgeting has been proven to be the most effective way for you to control your cash, which allows you to invest, spend and grow your business.
When business funds become split between marketing, office expenditure, production and sales, you tend to lose focus on how much money is being spent and where. Budgets are a vital tool in ensuring that you stay in control of expenditure.
By including these few things in your budget, you are already halfway to success:
1. Projected cash flow
You need to be able to have a good grasp on your cash flow on a month-month basis. It is vital for small businesses to be able to pinpoint any difficulties that the company may face in order to plan accordingly. So don’t forget to review it monthly.
2. Costs
No one wants to know how much they are spending, and the thought of looking at bills at the end of the month could turn into your own horror story. However, you need to budget for these 3 kinds of costs to ensure the business runs smoothly.
Fixed costs
Don’t forget to include items such as salaries, rent, and other fixed costs
Variable costs
These may include raw materials and overtime
One-off capital costs
These include those purchases that will only happen as a one-off. Purchasing of computer equipment, office furniture and other one-off expenses can be included here. An easy way to forecast these costs, it helps to contact suppliers regularly for updated quotes and to look at the company’s previous year’s records.
3. Revenues
Combine your sales history and how effective you expect your future efforts to be and this will help you come up with a number for your revenue forecasts.
Forecasts can help you prepare for the next 6-12 months. It always helps to be well prepared if something unfavourable might happen in your company.
What are some of the things that you think we have missed? Let us know!
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