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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.
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