A 12-month budget can be updated with actual expenditures and revenues each month so that you know you're on target.If you're missing the targets set out in your budget, you can use the budget to troubleshoot by figuring out how you can reduce expenses like labor or new computers, increase sales by more aggressive marketing, or lowering your profit expectations.These can be tricky because sometimes they will vary because of inflation, price increases, and other factors.Costs can be divided into categories: fixed, variable, and semi-variable.• Fixed costs are those expenses that remain the same, whether or not your sales rise or fall.It's a basic tenet of business - before you can make money you have to figure out how to spend it.Drafting a budget is a key way to help you turn your dreams for business success into reality.Some examples include rent, leased furniture, and insurance.• Variable costs correlate with sales volumes.These include the cost of raw materials you need to make products, inventory, and freight.• Semi-variable costs are fixed costs that can be variable when influenced by volume of business.
If you have been in business for a while, take your company's most recent financial statements -- be they generated by a ledger or a computer software program -- and use those as the basis for developing your sales and profit targets.
Why Your Business Needs a Budget The bottom line on why to draft a budget for your business is that it will help you figure our how much money you have, how much you need to spend, and how much you need to bring in to meet business goals. Bankers and other financiers may want to see a budget when you ask for a loan.
Employees should also be privy to the budget so that they understand where the business is going and are motivated to work harder.
You estimate this figure by subtracting your costs from your revenues.
The SBA advises to check with trade associations, accountants, or bankers to make sure that you're getting an appropriate profit from your business.