How to Prepare a Financial Budget
Can you account for every dollar and cent in your business?
Astute business owners typically answer yes to this question – and they mean it too.
On the other hand, have you planned how you will spend every dollar and cent in your business?
Take a moment to think about it, and your response may be more tentative. Budgeting allows you to take control of your business finances and helps you create tangible plans to meet your goals. There are many principles or rules for budgeting, and as a business person, here are four steps you can follow when preparing a financial budget.
Begin With Your Goals
Evaluate your goals, splitting them into short-term and long-term goals. This will help you create a budget that is aligned with what you seek to achieve. If your business experiences annual revenue growth, you may focus on increasing your profits by cutting down on costs. However, if the goal is a heavy investment to drive growth, your budget may have a period of heavy spending.
Review All Assumptions
This step requires looking back at the budget from the previous year and understanding the assumptions you based your projections on. Perhaps you estimated potential income or made decisions based on the business environment due to the impact of Covid-19. Where necessary, update your assumptions to reflect any changes that may impact you in the coming year.
Negotiate With Your Suppliers
Have you established a good relationship with your suppliers? As you prepare your budget, identify your suppliers, and negotiate with them for discounted rates. Doing this at the start of your budget creation helps you gain clarity on your expenses and reveals areas where you can make savings.
Estimate your Costs and Expenses
You will spend the bulk of your budget preparation time on this step. Estimate the amount of money that your business will bring in this month, including the revenue sources. Next, determine all your fixed costs of all sizes, even $2 online subscriptions. Add on your variable expense estimates and predict one-time spending. Putting this all together, you will have an idea of your net income and easily determine whether you are on track throughout the year. Create your budget to ensure sound financial decision-making and identification of your spending and revenue. With the support of RCN Accounting & Business Advisors, you can engage with a CPA who can help you use your budget as much more than an internal tool for your business. Your budget can help with a loan application and raising funds from investors. Get the support you need today by booking a discovery meeting at www.rcncpas.com.
