Business Budget Planning
Business Budget Planning is the First Part of the Business Planning Series of Articles
Now you have your business up and running it’s time to apply a key business fundamental Business Budget Planning
Business Budget Planning is something you must manage and control to get the maximum financial performance. Creating a Business Budget Planning process is an effective way to keep your business and most importantly finances on track, always remember the primary reason you are in business is to make a profit.
This article will highlight the advantages of Business Budget Planning will assist you in how to do it. A number of key action points are outlined to assist you in managing your business financial position.
Business Budget Planning For Success
When you’re running a business, day-to-day issues take the forefront, and it’s easy to lose sight of your original business goals and strategy and lose sight of the bigger picture. A successful business owner invests time to, prepare and review and regularly monitor finance and performance.
Having a good clearly defined, and realistic planning budget is what is needed to ensure the growth of your business. A realistic planning budget will help you focus resources on improving profits, reducing overheads and most importantly increase the return on your investment.
You’re probably already thinking about areas you can grow, also about your, cashflow and profit. Great if you are; now you need to turn these thoughts into a process to manage your business. A Business Budget Planning process doesn’t have to be difficult or time-consuming what is most important is that you make a budget plan.
Benefits from Budget Planning
The benefits of business planning are that it allows you to concentrate on the direction, you want your business to go a plan provides growth targets that will see that your company will grow. You can easily review your performance and see what could be affecting your businesses growth.
Business Budget Planning will give you the ability to make continuous improvement and foresee problems and give proven financial data to use as basis to make sound business financial decisions.
Make an Annual Financial Budget Plan
An Annual Financial Budget Plan will set out the strategy and is the action plan for your business. You need a clear financial picture of where you are now and where you expect your business finances to be stand over the year.
Your Annual Financial Budget Plan needs to include an outline of any changes that you want to make to your business and the cost impact of these. Include any foreseeable changes in your market, including your customer base and your competition that could impact your cash flow covering your income and costs both positive or negative.
Financial Budget Planning Cycle
Review your of your businesses financial performance should be an ongoing practice and measured against your lasts years balance. As you haven’t been trading for that long, you will need to review your current targets, more frequently, i.e. weekly/monthly recording any changes and measuring the trends.
A positive trend is an indication you are doing this right, well done keep it up. Downward trends need monitoring carefully, don’t despair you can easily turn this into a positive look carefully for a key indicator, it could be your customer base is not growing.
It may be as simple as looking at your market, find what you can do to attract more customers. Now you have a tool to indicate the problem, this is the great thing with budgets, and monitoring your financial position as issues arise you can rectify them before they become a problem.
Keep on analysing and recording your successes and failures on a regular basis, and at the end of each week and month review the data. As you do so, you will be building a valuable database and give you experience you can draw on in the coming year and years to come.
As a new small business owner, you may not see the need to budget. The thing is Business Budget Planning is for your businesses future, and ideas you may have to grow your business need planning and you will need money the funds to do this. Budgeting is a proven and effective way to control your businesses cash flow. Being in control of your cash flow gives you the flexibility to invest in new opportunities as they arise giving you that competitive edge.
As your business grows, you will not always be available to focus on every aspect. Having a Budget Plan, provides you a tool, so you can see which areas of your business may need more investment. You can then make an informed decision to which part of your business to invest more, to strengthen any weakness or to give a push to turn extra profit. Money in any business is always moving, and it will move into many different aspects of your business and by Business Budget Planning you stay in control of where the money flows.
Business Budget Planning is to control your finances and ensure you can continue to cover any commitments and to assist you to make informed decisions to achieve your business goals.
Real Business Budget Planning gives you the control needed to ensure you have the money for your businesses growth.
Benefits of Business Budget Planning
Having a good budget give so many benefits now yu control the money, and you can manage it effectively, your decision-making is now backed up by solid, proven data allowing you to meet your business goals. Now you can allocate funds where you see fit and monitor performance and identify problems before they occur, enabling you to change in the right direction.
Create A business Budget
Creating a Business Budget Planning process is an effective way to keep your business, and most importantly finances on track. Now you can allocate resources where they are required, keeping your business successful and importantly profitable.
A budget is a very easy document to prepare, and it does not need, to be complicated, a good budget is simply a list of what you earn and what you spend, and then balanced to determine your profit or loss.
Create a forecast budget
Before you start, your budget make a forecast budget make a list and ask these questions; remember your answers need to be realistic, this is real not some fantasy. What your write down can have long-term effects on your business for better or worse. If you can get a friend with some understanding of business budgeting to assist you.
What do you think your income will be for the budget period?
What are your direct costs?
Separate these into types e.g. Purchase Stock, Services, Wages/Salaries, Advertising etc.
What are the fixed costs or overheads (cost to run your business each day) this cost typically doesn’t vary.
Separate these into types e.g. Rent, Loan Repayments Utilities (Power, Phone, Internet) Vehicle Expenses, Printing, Tax.
Fixed (overheads) and Direct costs vary depending on the business type don’t worry which, category you put them in at this stage the important thing is you capture them.
While a forecast is very important as it gives a guide to benchmarking your businesses finances, remember it’s a forecast, just like a weather forecast, things change.
Now with your forecast as a basis, make a budget based on your forecast, stick to it as feasibly possible, review and revise as needed. Successful businesses are continually monitoring and controlling the budget and preparing budgets a year or more in advance.
Key Steps to Make a Budget
There are a number of key steps you should follow to make sure your budgets and plans are as realistic and useful as possible.
Make time for budgeting, time is one of your most valuable resources, investing time in creating a realistic budget, will make managing it easier and make it effective.
Create realistic budgets, your budget needs to contain enough information to make it easy to monitor your, income, costs and operating capital, (yes money in a bank is a requirement to operate a business).
Use some form of Accounting System it can be a simple Balance sheet accounting book or basic software like MS Excel or a full Accounting Package, i.e. Xero or Quicken.
Or you can download a free simple MS Excel budget planner here.Personal Budget Spreadsheet
Business Budget Planning is the first in a series of articles on Business Planning, the next article Business Planning for Success, will discuss how to prepare a detailed Business Plan for the Small Business.
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About Darren Wilkins
Darren is a semi-retired senior executive and serial entrepreneur who runs a number, of successful businesses both online and offline.
With 30+ years experience in management and as a management consultant Darren has a can-do attitude and offers real practical advice that can be used for any business no matter the size, Darren is using his time focusing on online opportunities and building better businesses.
With global experience managing and directing multimillion-dollar mega construction projects and businesses. Darren has a wealth of practical experience to share and wants to help you and your business.