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The business budget is one of the most powerful financial budget template which allows business owners to maintain good long and short range financial plan by controlling their cash flow instead of allowing the cash control the business. The business budget template is expected to act as a rail for the company to ride on in this case. It allows the company to channel resources to where it will have the maximum impact while checking and cutting unnecessary cost. In fact, using a business budget is even more important to a small business owner because without tracking the income and expenditure of the business, it is practically impossible to determine how well the business is performing.
There are actually many formats of a business budget. However, a typical business budget should include your cost, revenue and importantly your cash flow so as to show at any point whether there is money for capital expenses or improvements. Most business budgets are expected to be tabulated yearly divide up to 12 months in such a way that there are blank columns where the actual results are filled as the year progresses. Depending on the type of business involved, it may be necessary to include different types of expenses or income. The components of the income section could include the non operating income, rental income, interest income and other sources of income while the expenses section is expected to list the dues and subscription expenses, maintenance and repairs expenses, advertising expenses among others.
Creating a good business budget is a sure way to keep your business profitable. A business budget is expected to involve a revenue forecast, cost estimation and a small window for a reasonable profit. However, creating a business budget looks difficult for most people when it is not. The following steps by step guide will help in creating a quality business budget template
Step 1: The first step when trying to create a business budget is to get familiarized with the concept of budgeting itself, understand why budget is essential, get to understand each component of a budget, understand your current position, carry out market research and use past data. These are theoretical but form a basis for an effective business budget creation.
Step 2: You have the option to start from scratch or downloading a quality template online. Note that the template must have available information tailored to your particular business to be considered good enough.
Step 3: Decide and input your target profit margin. Note that your profit margin is expected to be equal to your revenue subtracted from your total expenses.
Step 4: At this point you are expected to determine your fixed costs. However, it is important to note that fixed costs are generally unchanged all year round and include the costs like rent, tax and insurance. Add it up to get the exact fixed cost per year.
Step 5: Estimate and input your variable costs which could be the cost of materials and inventory to support sales.
Step 6: Estimate your semi variable cost which could be cost with fixed component but at the same time depends on activities.
Step 7: At this point, you are expected to add all these cost together and make some adjustment where necessary.. These will form the basis of checking your profitability, your margins and your targets.
Step 8: Save your file and track them as at when necessary.
Creating a business budget could also be simple as creating a budget worksheet with columns showing the monthly expenses and yearly expenses as described above. In addition, it should also show the monthly and yearly income of the business. This method is particularly useful for those who have the experience in budgeting do not require any budget template for guide.
It is important to include columns of actual expenses to show the actual expenditures for the business. This will help show you where the money is going to which may prompt a quick realignment of funds or adjustments of the business plan.
Also note that your projected business budget in most cases will not match with your real business expenses and income. However, budget can always be changed when necessary but the first step is to create one and every other thing follows.
