The things that you should have in your small business budget

Before you can even begin to make a budget forecast or scenario you are going to need to understand what a budget forecast or scenario is. Basically a budget forecast or scenario is a way for your company to predict what kind of income you are going to have and what kind of expenses you are going to incur throughout the year. Many businesses don't make a budget forecast or scenario so they don't realize that it is actually very easy and requires a small amount of time.

Here are some things that you should include in your budget for your small business.

Tip one:
Review program and management achievements and fiscal performance for the year that has just ended. When doing this you should compare your budget from last year to your actual figures to see how close you came to following your budget and to see if any changes are necessary. You should also review your objectives and goals from the previous year to see if they were all meet or if not why they were not meet. After reviewing your prior year's goals and objectives you should start discussing what your new goals and objectives for the upcoming year are.

Tip two:
You will also need to estimate what your new costs are going to be in order to reach your new goals and objectives. When you are estimating your costs you need to take in both fixed costs and variable costs. Sometimes fixed costs are overlooked in the budget process because regardless of what is going on we still have to pay those costs. Although our fixed costs are not tied to our current goals or objectives, such as building our customer base, they still need to be accounted for because they are an integral part of running the business. Each cost should be listed separately. For example wages should have its own line item; raw materials should be on a separate line, etc.

Tip three:
You will also need to estimate your income for the year. You can do this by comparing the last few years' income to get a general idea. If one of your goals is to increase your sales you should add in some extra income but always estimate on the conservative side. If you are just starting your business then you are going to need to predict your sales for the year, basically what you are going to want to look at is some of your market research to see how well other businesses did in their first year so that you can base your sales off of some realistic data rather than just guessing, but again you want to predict the income from your sales conservatively so that you don't spend more then you actually have.

Tip four:
You will also need to compare your expenses and income that you have budgeted to see if they balance or are at least close to balancing. Keep in mind that not all budgets have to balance but you must understand why they do not balance. For example do you plan on purchasing a major asset this year to help increase your business over the next year or two? If so you might be running on a deficit this year, but once your sales increase you will no longer be running on a deficit.

Tip five:
A very important thing to consider when creating a budget forecast or scenario is to do it before the start of the next business year. You should being creating your budget forecast or scenario at least three months before the end of the year; this will give your department heads plenty of time to meet all deadlines.