Money & Finance

Preparing Your Business Budget By Ryan M. Hoback, Motivated Entrepreneur Incubation & Consulting

So you’re ready to chart future of your business, you have conceptualized your vision and you are now ready to plan budget for your business. This is a big step, and an integral part of business planning which will serve as a very important catalyst toward achieving goals you have set. The first step you want to take in preparing your budget is to label and identify your objectives behind budget. Your budget will help you assess risks and rewards associated with running your business.

First you need to determine objectives or desired results you are seeking from budget you’re developing. Whether you are to expand and grow your business or determine your return on investment (ROI), preparing a budget will aid you tremendously in structuring your business. Once you have determined your objectives and reasons for preparing your budget, next step is to gather together all information necessary to assess and prepare your financials.

Example:

Sue’s Pest Service

Objectives: Develop projections for my start-up business

Show my ROI – Return On Investment

One good place to start is to list all your accounts, that is, each expense category and how much you will spend on that category for allotted time frame of your budget.

Chart of Accounts

Labor (3 Pest Control Agents)

Materials (Spray Tanks, Pesticide)

Utilities (Lights)

Rent

Office Equipment (Stationary, Flyers)

Developing chart of accounts allows you to begin comparing your numerical data. The next step involves identifying and determining your fixed and variable expenses. Since you have developed your chart of accounts already this is a good reference or starting point, remember, your fixed expenses generally stay same. Examples are insurance, rent, salaried wages, interest, and office maintenance. When projecting fixed expenses for years ahead, take into account any raises that may be coming to employees or any changes expected in expenses to come.

In addition to fixed expenses, you must determine what your variable expenses will be. Variable expenses are just as they sound, they are expenses that will change or vary depending on sales. Some examples are cost of goods for resale, as well as cost of labor in some service industries. In addition, advertising expenses, commissions, and payroll taxes can vary. You should list out different categories you have deduced to be variable, and then allocate percentages throughout.