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Steps for setting up a business budget

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One of the most important things that you will do as a business owner is developing a business budget. Having a budget is just as crucial, for your business, as it is for your personal finances. Having a business budget, will help you to see where you are spending your money, if you are spending it in the most effective places and most importantly if you are wasting money. However, many business owners make the mistake of thinking that they don't need a business budget, or use the excuse that they don't have time to write one up. This can be disastrous for your business. The bottom line is that coming up with a business budget, is a fairly easy process. Here are the steps for setting up a business budget-

  • Set aside some time-It is important to set aside a specific time period to devote to your business budget. First, you will have to take the time to write your budget, then you will need to take the time to monitor it, on a regular basis, to make sure that it is being followed correctly, or determine if you need to make changes. This is the only way to determine if you are controlling and managing your cash flow. Keep in mind that there are many software programs that make writing a budget, and maintaining it, a fairly simple process. Finally, it is important to understand that once you write the initial business budget, it won't take much time everyday to maintain it.
  • Look at the past-Unless you are writing the first budget, for a brand new business, you will need to look at past performance to determine, where to get started. As you take a look back at how your business has done, you will learn from the mistakes and successes, you have made. Keep in mind though you need to consider other factors besides past numbers.
  • Set goals with your budget-If you have goals that are connected with your budget, you are far more likely to base your budget, on realistic and achievable facts. Simply setting up numbers is notthe best way to determine your budget. Remember, that your judgment alone can be clouded and your goal setting may not realistic. You will want to use past information and current market conditions, to set the best goals, for your budget.
  • Meet with your staff-Keep in mind that the people who make your business every day, will have a very good idea of how much money it takes to do so. Meeting with them and getting their input can be a helpful step in putting together your budget. Do not overlook the vital information that your employees can provide you, when it comes to the money you will need to keep your business running.
Now that you know how to write a business budget, it is important to know what should be included in it. There are a number of things that are fairly common among businesses, however, you may also need specific categories that are unique to your business. Here are some categories that are fairly common on most business budgets-
  • Projected cash flow-You want your budget to clearly show the amount of cash flow that you have for the company. Keep in mind that you will need to account for seasonal ups and downs in sales, and you should also include enough for a cash reserve.
  • Costs-This category will include how money it cost for every expense (both fixed and variable) within your business. Keep in mind that knowing the cost for every aspect of your business will also help you to set the right price on your product or service.
  • Revenue-An integral part of your business budget is sales forecasting. You will need to have a section of your budget that deals directly with that.
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