How To Start a Business Budget

Every successful business needs a budget, and here are some tips on how to make one that works for you.

"What really turned me over was the ability to understand how everything works without any prior knowledge about sublimation."
Deepti Verma

Why Your Business Needs a Budget

The reason on why you should have a budget for your business is that it really helps you understand how much money you have, how much you can spend, and how much you need to bring in to meet business targets. But there are other reasons, too. Banks or other financial institutions may want to see a budget when you ask for a loan. Depending on the location of the business outfit and what you can sell in that particular location, pick the right numbers of items you can add to your inventory. Based on this you must then select the correct machine model and printer.

Understand your user experience

According to the Indian Small Business Administration, a budget can be used to indicate some of the following:

  • The funds needed for establishment/materials.
  • Total start-up costs for a new business, .
  • Costs of internal operations.
  • The necessary revenues¬† to keep the business in position.
  • A realistic estimate of expected profits.

Components of a Budget

A budget must include your revenues, your costs, and most importantly your profits or cash flow so that you know exactly how much money is left over for capital improvements or capital expenses. A budget should be tabulated at least yearly. In most cases yearly budgets are also divided up into 12 months, with blank columns next to your estimates to fill in with your actual results. You may want to consult your C.A. in preparing a budget, but it is something you can do yourself with a little knowledge in finance or a free budget worksheets and templates available online.

How to Draft a Business Budget

Drafting a budget is easiest if you were a commerce student. But if you’re reading my article, the odds may be that you’ve never written a budget for your business before. In that case, read on.

Your target is sales and profits and that is all you need. Start by deciding a target for your sales revenues, advises SCORE, so you can grow and succeed. For a startup business, you must begin by estimating what type of real profit you’d like to see in the coming year. If you have been in business for a while, take your company’s most recent financial statements, ledgers and use them as the basis for developing your sales and profit targets. The reason you start with sales or profits is because this information will help drive the rest of your estimates for costs, expenses, and expenditures. Take into considering factors that might affect your sales, or loss of a major customer. But relax, the basic idea of budgeting is that the sales or profit figures will never turn out to be exactly right.

Start with calculating operating costs. A good place to start, once again, is the financial statements of your old firm. These statements should include a list of the fixed and variable expenses you incurred during the year, salaries and wages, rent, research & travel, utilities, taxes, etc. When starting out, you are going see more of expenses and an average profit.

Second, Figure out gross profit margin. Again, this is much easier if you’ve been in business for a while or you have a commerce background. In that case, estimate the cost of your goods sold beginning with inventory, goods purchased or manufactured, shipping charges, etc. & subtract that from your overall sales revenue.

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