Your money and finance

Business

Home | Money Basics | Loans & Debt | Wealth Creation | Kids | Resources | About US

How to prepare a Business Budget

A sound business budget is one of the best ways for your business to remain profitable - and solvent! Every year thousands of potentially successful businesses fail because of poor financial management.

So when starting a new business venture, you need to be able to effectively manage your finances, by planning a realistic budget – not just for the initial start-up costs, but for the ongoing running costs of the business too.

Start-up Business Budget
Your start-up budget includes the one-time costs such as assets (major equipment, office furniture, etc), utility connections, rent and bond, etc. as well sufficient as running costs for the first couple of months of business to cover your costs before you start receiving serious revenue.

The start-up budget should allow for:

  • Staff costs prior to business opening, and during the early weeks of operation
  • Franchise costs, if you are opening a franchise
  • Legal and professional fees for business consultants
  • Rental Bond and rent for the first few weeks
  • Licenses and permits if required
  • Equipment hire or purchase
  • Insurances
  • Office Supplies and consumables
  • Advertising and promotions
  • Accounting system set-up
  • Utilities
  • Payroll expenses
When working out your start-up budget, think realistically about the terms of payment for your customers and when you are likely to start receiving revenue. Is it a cash-up-front business such as a retail store, or will you be invoicing your clients for services?

Operating Business Budget
An operating budget reflects your on-going business expenses and income, and establishes priorities in terms of how you spend your money. Your operating budget also should include money to cover the first three to six months of operation and should allow for the following expenses:
  • Personnel hire including salaries and retirement plan contributions
  • Insurance
  • Rent and utilities
  • Depreciation on equipment and other assets
  • Loan repayments
  • Advertising and promotions
  • Legal and accounting fees
  • Supplies and consumables
  • Payroll expenses
  • Fees
  • Taxes
  • Repairs/maintenance
  • Miscellaneous expenses
So What Now?
Now that you have a start-up and operating budget, you can work out how you are going to finance your business venture. You need to consider:
  • How much money do you have to put into your business?
  • How much money do you need for business start-up?
  • Therefore, how much money do you need to borrow to start-up your business?
  • How much money do you need to stay in business? How will you fund this?
  • What type of accounting system will you use?
  • What will your sales goals and profit goals for the coming year be?
  • What financial projections do you need to include in your business plan?
  • What kind of stock control system will you use?
Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help in preparing cash flow and income statements and your balance sheet. Your aim is not to become a financial wizard, but to understand the financial tools well enough to gain their benefits. Your accountant or financial adviser can help you accomplish this goal.
Related Topics:

We are not certified financial planners or advisors. The information in this website is general information only. Always consult a licensed financial planner before making any finance or investment decision.


Take Control of your Money and Finance Today!
© 2008 - 2009