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Looking at your business finances from the past year to help plan the future budget

When running a business, managing your money is very important. This requires a budget. But, how do you know how much money should be placed in your budget? You don't want to not have enough money, or you'll be in deep trouble. You don't want to wastemoney, or you'll find yourself in the depths of despair. Although there are many ways to plan your business's financial budget, the best way is to base it off last year's budget and actual expenditures.

Someone once said, we can write the future using the past.We can see our financial gains and losses by viewing previous year's actual recorded expenses and budget.We can learn from our past mistakes and learn not to repeat them. It is like the story of the child who placed his hand on the stove, and got burned. He eventually learned not to place his hand on the stove. How did he learn not to touch the stove?Past experiences taught the boy not to touch the hot stove. What does this story have anything to do with budgets?Your budget is like your hand, and the stove is like an ineffective budget.Accuracy is essential to having a good budget.You can't see the future, but you can get a pretty good idea of what it may be like. You should use your previous budgets and books, and see what financial difficulties you experienced and change your budget for the next year accordingly.


Everything changes over the course of time. You should use the most recent budgets to plan your upcoming budget. If you own a truck company and you create a budget referring to a budget you had thirty years ago, you won't even have put enough money aside to pay for your gas (gas isn't 40 cents a gallon anymore).

So planning your budget off the most current budget you have recorded is a very good idea. Also, each year's budget will be more accurate to what you need. The first year your budget may have been really off, but it gradually got better. It is a continuing process. Your current budget will be built off the backs of your older budgets, and will be a much improved budget.

But, even if you create an accurate projection for the oncoming year, using last year's actual expenditures, you always have to expect the unexpected.Have some money set aside for a rainy day. For example, let's say you own a chain of stores in Louisiana. You lock up your New Orleans store one night at closing time, and you wake up the next morning to find it completely submerged in the cold depths of the ocean. Natural disasters can drastically affect your business. If you completely based your budget on last year's budget, you would be unprepared for the literal and figurative floods in life. So make sure you set some money aside, no matter how tight your budget. Just remember that the economy can change due to natural disasters, wars, and economic downturns. All of these unseen factors can change the way you need to plan your budget.

But, what if you have just started your company and have nothing to base your budget on? Well, your not completely out of luck. There are many other sources of information you can base your estimate on. You can find out the cost to rent out your workspace, you can estimate how many much money you will need for supplies to supply the company. For example, if you franchise a burger restaurant, you can find out how much food they sell in a year, and how much they spend, and you can create your own budget accordingly. You can also get a good idea of how much money you will need in your budget by seeing how much money it takes to fill your employees' salaries.

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