If you want to develop a thriving, long-term business, you’ll need a precise and accurate business budget. But how do you go about making one? Most new business owners don’t have experience managing a business budget and are afraid of making mistakes. So, no need to worry. As Yogi & Associates can help! Our accountants have put together everything you need to know by giving you a guide on 8 steps to create a best business budget, which also includes a spreadsheet with all the information you need.
In order to create a business budget in Mississauga, you need to learn the basic steps and terminology first. This will enable you to get there and make an accurate business budget. Our company provides you with everything needed for getting your business well-aligned with turning it into a successful one by providing you the proper guidance of knowing where to find the information and learning the terms with which you should be familiar. So, call Yogi & Associates!
“A budget doesn’t limit your freedom; it gives you freedom.”
– Rachel Cruze
What is Business Budget?
A business budget is a plan for meeting your financial goals. It helps you decide how much to save, and how to spend on things you want and need.
Important: When you make a budget, you track what you spend and save each month by balancing your income with your expenditures and including a vacation fund or emergency fund.
Nine Benefits of a Business Budget:
A business budget is a strategic document that holds you accountable for your spending habits. You can also see how much of a dollar you are making, as well as whether or not you’re taking advantage of a tax deduction.
- Ensures that cash flow is properly managed.
- Increase revenue and profitability
- Reduce fixed and variable costs.
- Keep track of performance.
- Knows when it’s slow and when it’s busy.
- Help you gain industrial knowledge
- Figures out what your best-selling product or service is.
- Makes a better decision.
- Prepares you for the unexpected.
Eight Steps to Create a Business Budget:
First of all, creating a business budget is to make sure that you have a good understanding of what your revenue and expenses are as they relate to the business. To do this, document every time you make a sale or every time you spend money on something related to your business. Once you have all of this information documented, begin working backward from your current numbers to create a better idea of where the future is headed.
Step 1. Understand Your Monthly Income And Expenses
The best way to start building a business budget is to understand your monthly income and expenses. This can be done by writing down your pay stubs, bills, bank statements, and other information that documents your business’s income. Look for ways to increase your monthly income or decrease expenses (for example, by recycling papers). Once you’ve identified all of your income streams and created an accurate picture of where the money comes from, calculate each month’s expected income according to the spending patterns outlined below.
Step 2. Fixed Costs
The second step in creating a business budget is figuring out your fixed costs. Fixed costs generally occur every week or month, and may include monthly rent, electricity, taxes, and insurance. You can also estimate how much it will cost to keep the doors open to plan ahead so that you don’t end up paying too much to start your business out.
Step 3. Variable Expenses
You’ll need to figure out your business’s variable expenses, which are necessary for your business to stay in operation. Variable expenses are those that change depending on how much you use the service. During lean months, you’ll need to lower your business’s variable expenses, beginning with discretionary spending. These include things like utilities and education. Budgeting for them is just a part of running a successful business!
If you want to get information about how to calculate varaiable cost, you can see our article by clicking A Simple Guide to Variable Cost.
Step 4. One-Off Costs
Adding one-off costs to your business budget is a great way to protect yourself from unexpected financial challenges. If you know you have one-time spend on the horizon (for example, an upcoming business course or a new laptop), adding them to your budget can help you set aside the financial resources necessary to cover those expenses—and protect your business from a sudden or large financial burden.
Step 5. Balance Spreadsheet:
You’ll need to collect and prepare all the necessary information for your cash flow. A spreadsheet can be created to show how much money comes in during the month and how much money goes out. The goal is to get a clear picture of how much more or less you need in your business bank account at the end of each month.
Step 6. Cash Flow:
Cash flow is the lifeblood of your business and one of the most important metrics to monitor on a daily, weekly and monthly basis. Make sure you are keeping an eye on it by setting up alerts so you know when to forecast your cash.
Step 7. Profit:
To put it simply, profit is what you take home after deducting your expenses from your revenue. How much profit you make will depend on how much revenue you achieve and how much you spend. You can increase your profit by lowering expenses, increasing sales, and working smarter.
Step 8. Budget Calculator
The last step is to use a budget calculator. Business budget is essential for any entrepreneur, regardless of the type of business you’re trying to run. Using a budget calculator can help you see exactly where you stand when it comes to your business budget planning. It might sound obvious, but getting all the numbers in your budget in one easy-to-read summary is helpful.
Business Budget: Bottom Line!
Creating a business budget is critical, but often overlooked step to growing your business in Mississauga. It’s a must to have a controlled business budget so that you can see how much money you’re spending, where it’s all going, and how much money is coming in. A great business budget tool can help you accomplish this task easily.
So, if you’re looking for the right steps to create a budget for your business, Contact Yogi & Associates! As we have what you need! Our experts will help you understand the basics of budgeting and give you the skills to maintain your budget and manage it efficiently. We can explain in detail what it takes to create a budget and how to maintain it so that your financial picture stays clear and stable.