The reason you start with sales and/or profits is because this information will drive the rest of your estimates for costs, expenses, and capital expenditures.Take into considering factors that might affect your sales numbers -- such as the economy or the loss of a major customer – but don't worry too much because the basic tenet of budgeting is that the figures will never turn out to be exactly right. A good place to start, once again, is those financial statements.
The reason you start with sales and/or profits is because this information will drive the rest of your estimates for costs, expenses, and capital expenditures.Take into considering factors that might affect your sales numbers -- such as the economy or the loss of a major customer – but don't worry too much because the basic tenet of budgeting is that the figures will never turn out to be exactly right. A good place to start, once again, is those financial statements.Tags: Good Thesis For AutobiographyEssay About Love Peace And WarEssays On My Last VacationsBusiness Plan Step By StepHow To Solve The Problem Of Global WarmingShohreh Abdolrahimi ThesisElementary School Student EssaysEssays On Involuntary ManslaughterElectoral College Essay PapersEssay On Teamwork And Leadership
Once you have profit estimates, you can also start to plan for whether you can purchase new equipment, move to a bigger location, add staff, or give your employees bonuses or raises.
You can also troubleshoot your projected costs and see where you can cut if your profit projections aren't up to snuff.
Why Your Business Needs a Budget The bottom line on why to draft a budget for your business is that it will help you figure our how much money you have, how much you need to spend, and how much you need to bring in to meet business goals. Bankers and other financiers may want to see a budget when you ask for a loan.
Employees should also be privy to the budget so that they understand where the business is going and are motivated to work harder.
These can be tricky because sometimes they will vary because of inflation, price increases, and other factors.
Costs can be divided into categories: fixed, variable, and semi-variable.• Fixed costs are those expenses that remain the same, whether or not your sales rise or fall.
It also may let you spot problems before they mushroom, so that you can switch gears."It's like a roadmap for your company," says Victor Butcher, of Butcher Financial Services in Memphis, Tenn., a former president of the Tennessee Society of Certified Public Accountants' Memphis Chapter who advises small businesses.
"You need the roadmap to understand where you're going with your business."Conversely, if you don't have the discipline to sit down and assemble a business budget, you may not have insight into how your business is performing from year to year, whether there are cuts you can make to improve performance and whether you have the needed funds to purchase new equipment -- be it computers, trucks, machinery, or a new factory.
The budget should operate according to basic mathematical equations -- either "sales = total cost profit" or "sales - total cost = profit."How to Draft a Business Budget Drafting a budget is easiest if you wrote one the previous year.
Those projections, coupled with the actual income and expense figures you realized, would form the basis of your estimates for the coming year. Start out by developing a target for your sales revenues, advises SCORE, a non-profit group with 370 chapters that is dedicated to helping entrepreneurs and small businesses form, grow and succeed.