Building a Successful Budget for Your Business
While it’s true that a budget is about numbers, it’s also so much more. It is the financial expression of your organization’s plan for this year. Here are some quick tips for creating a successful yearly budget (even if the year has already started).
1. Recognize that a budget is essential.
A budget provides a plan, helps manage cash flow, and creates the basis with which to secure financing.
2. Keep it simple.
A budget has 3 basic categories: REVENUE - EXPENSES = PROFIT. That’s all you really need!
3. Build on what you already have.
Begin with the financial recordkeeping you used for this year in order to begin planning for next year. Start by looking at last year’s results.
- Was profit where you wanted it to be?
- If not, what is a reasonable expectation for the profit you could earn in the upcoming year?
4. Make a plan.
Work out how much your revenue would have to increase in order to reach your profit goal. What specific steps will you have to take to make that happen? Think through every expense, including the expenses that will be needed in order to achieve the new revenue level.
- Are there any expenses you could reduce by shopping around or by implementing operating efficiencies?
- Have you listed every expense?
- Add a little extra to accommodate for unforeseen circumstances.
Share the plan and your preliminary budget with your employees. Listen to their comments and make changes as appropriate.
5. Complete the spreadsheet.
Determine how much revenue you can expect to collect in each month and which expenses you can expect to pay each month. Some of these will be consistent every month, while some will be specific to certain months. Make comments in each category that explain why you expected the revenue/expenses to be as you have projected.
6. Make the budget a living document.
Use the expected results of the budget as the company’s goals and announce these goals and your plan to your employees. Complete a monthly check-in of the budget where you compare the projected budget versus the actual revenue and expenses. Discuss the results with your employees or board of advisors.
- Are you on target with meeting your revenue and expense goals?
- If on target, how can you maximize these results?
- If you’re missing the projections, how can you get back on track?
- Have circumstances changed so much that you need to adjust the budget moving forward?
Budgeting is just one important aspect of running a successful business,
and we hope the above information can help you get started
on your budget for the new year.
We always love to Pay it Forward to businesses that keep our community strong!
Please don't hesitate to contact Mary Willenborg for a Free mini-Audit to discuss your budget...
or any other issue your business may have.