Make spending plan for your business
Answers
Answer:
Step 1: Examine Your Revenue. ...
Step 2: Subtract Fixed Costs. ...
Step 3: Determine Variable Expenses. ...
Step 4: Set Aside a Contingency Fund for Unexpected Costs. ...
Step 5: Create Your Profit & Loss Statement. ...
Step 6: Outline Your Forward-Looking Business Budget.
Answer:
When you build a business, there are a lot of things to stay on top of, from marketing and finding new clients to building a website and establishing your digital presence.
But there’s one element that you want to stay on top of from the very beginning—and that’s your business budget.
Having a detailed and accurate budget is a must if you want to build a thriving, sustainable business. But how, exactly, do you create one?
Let’s take a look at how to create a small business budget in five simple, straightforward steps.
What’s a Business Budget—and Why Is It Important?
Before we jump into how to create a business budget, let’s quickly cover what a business budget is—and why it’s so important for your small business.
A business budget is an overview of your business’ finances. It outlines key information on both the current state of your finances (including income and expenses) and your long-term financial goals. Because your budget will play a key role in making sound financial decisions for your business, it should be one of the first tasks you tackle.
And, as a financially savvy business owner, you’ll also want to have a budget in place to help you:
Make sound financial decisions. In many ways, your business budget is like a financial road map. It helps you evaluate where your business finances currently stand—and what you need to do to hit your financial goals in the future.
Identify where to cut spending or grow revenue. Your business budget can help you identify areas to decrease your spending or increase your revenue, which will increase your profitability in the process.
Land funding to grow your business. If you’re planning to apply for a business loan or raise funding from investors, you’ll need to provide a detailed budget that outlines your income and expenses.
Now that you understand why business budget creation is so important, let’s jump into how to do it.
Step 1: Tally Your Income Sources
mastering cash flow
First things first. When building a small business budget, you need to figure out how much money your business is bringing in each month and where that money is coming from.
Your sales figures (which you can access using the Profit & Loss report function in FreshBooks) are a great place to start. From there, you can add any other sources of income for your business throughout the month.
Your total number of income sources will depend on your business model.
For example, if you run a freelance writing business, you might have multiple sources of income from:
Freelance writing projects
A writing course you sell on your website
Consulting with other writers who are starting small businesses
Or, if you run a brick-and-mortar retail business, you may only have one source of income from your store sales.
However many income sources you have, make sure to account for any and all income that’s flowing into your business—then tally all those sources to get a clear picture of your total monthly income.
Step 2: Determine Fixed Costs
Once you’ve got a handle on your income, it’s time to get a handle of your costs—starting with fixed costs.
Your fixed costs are any expenses that stay the same from month to month. This can include expenses like rent, certain utilities (like internet or phone plans), website hosting, and payroll costs.
Review your expenses (either via your bank statements or through your FreshBooks reports) and see which costs have stayed the same from month-to-month. These are the expenses you’re going to categorize as fixed costs.
Once these costs are determined, add them together to get your total fixed cost expenses for the month.
Income:
A Client Hourly Earnings: $5,000
B Client Hourly Earnings: $4,500
C Client Hourly Earnings: $6,000
Product Sales: $1,500
Loans: $1,000
Savings: $1,000
Investment Income: $500
Total Income: $19,500
Expenses:
FIXED COSTS
Rent: $1,000
Internet: $50
Payroll costs: $5,000
Website hosting: $50
Insurance: $50
Government and bank fees: $25
Cell phone: $50
Accounting services: $100
Legal services: $100
Total Fixed Costs: $6,425
VARIABLE EXPENSES
Sales commissions: $2,000
Contractor wages: $500
Electricity bill: $125
Gas bill: $75
Water bill: $125
Printing services: $300
Raw materials: $200
Digital advertising costs: $750
Travel and events: $0
Transportation: $50
Total Variable Expenses: $4,125
ONE-TIME SPENDS
Office furniture: $450
Office supplies for new location: $300
December business retreat: $1,000
New time tracking software: $500
Client gifts: $100
One-Time Spends: $2,350
Expenses: $12,900
Total Income ($19,500) – Total Expenses ($12,900) = Total Net Income ($