After years of working for others, you have decided it is time to scratch your own itch and start a company or open a storefront. You have the vision for your products, your target market and ideal customers and maybe even the location for your headquarters. However, before you can take that first crucial step towards executing your dream, remember that you need to know all the associate costs.
Below you will find five steps for creating your first business budget.
1. Determine the format as well as the frequency of the budget: You should use a consistent format such as an Excel spreadsheet or other type of accounting software. Based on the goals of your company, you should also determine whether you want to use a monthly, quarterly or yearly budget for your business. Starting out, however, you might want to stick with a monthly budget so you can analyze and compare your predicted expenditures to your actual expenses and incoming revenue.
2. Fixed expenses should be part of your initial budget: These expenses represent the foundational building blocks of your budget as they will more than likely not change over the first several months or quarters. Fixed expenses will include loan payments, commercial expenses and mortgage payments.
3. Include variable expenses next: After determining your nonnegotiable fixed expenses, you can add expenditures that have the potential to change from month to month such as consumable supply costs, utility bills and phone bills. For this initial budget, you can research average costs in your area for the last six months to a year.
4. Create an earnings forecast: Once you determine this, place the figure in the income section of your budget (though leave the actual income space blank until the end of your budget period).
5. Perform an analysis at the end of your budget period: The best way to make sure you are meeting or exceeding your budget is to perform a thorough analysis at the end of each month, quarter or year to make sure your expenditures and income line up with what your company actually spent and received during that period.
If you have any questions about these steps, feel free to email us at email@example.com!