Making a budget for your business is one of the most important steps that are necessary in order to keep its financial health on a satisfactory level in the nearest future. However, a lot of first-time entrepreneurs haven’t got a clue what this plan is supposed to entail. Sure, you need to consider your income and your outcome, however, there are many different types of costs and many different sources of revenue, which makes your life a lot easier.
Other than this, budgeting is a subtle skill, more than it is an exact science, which is why the more factors you include, the more accurate the estimate will be. With that in mind and without further ado, here are a few budgeting and financial plans for beginners.
Table of Contents
Start with fixed costs
The first thing you need to do when it comes to budgeting and financial planning for beginners is the issue of fixed costs. These costs are something that you can easily anticipate, seeing as how they consist of fixed items like the cost of rent or mortgage, as well as numerous other expenses. Other than this, you have website hosting, specialist services, insurance costs, as well as government and bank fees. All in all, this is a great method of preparing for the first step.
Another item on the list is the so-called variable expenses. For instance, raw materials are stock market traded commodity, whose value fluctuates over the course of time. Not every week has the same number of work hours, which means that the amount of money that you spend on salaries might go up or down. The cost of advertising, transportation and event hosting will also vary (it’s not something that you do every month). Travelling for business is also an expense that needs to find its spot on this list. It’s also something that you need to take into serious consideration.
Think about one-time spends
The third item on the list of expenses is the one-time spends. These are essential when it comes to the initial fundraising. Here, you have items like corporate vehicles, office furniture, computers, software licenses and some office supplies. Gifts can also be counted here, due to the fact that the scheduling of their purchases tends to be highly irregular. With this, the last type of your expenses will be on the list, which means that you can start with the next chapter – the list of your income sources.
List your income sources
Speaking of income, you may have more to consider than you’ve bargained for. First, naturally, there are product sales. If your business is providing a certain service, you need to take into consideration the hourly earnings of your business. Provided that you have investments (in order to diversify your sources of revenue), you may need to take their average yield, as well. Apart from this, there are loans (especially if you’re collecting interest) and account receivables. Bear in mind that these account receivables may be sold to a factoring company. In this case, you receive the money right away but collect a slightly smaller amount.
Consult professional help
There are some aspects of the business (such as tax reports) that are probably best left to professionals. However, there’s nothing preventing you from taking an active interest in the issues regarding these outsourced financial tasks. The best thing to do, nonetheless, is to outsource locally. For instance, if your enterprise is located somewhere in central Sydney, it would be for the best if you were to look for tax agents from Glebe to collaborate with. This way, you get the service of experts while making the logistics behind it easier to manage.
If there’s one thing you need to understand about costs (of literally everything), it’s that they evolve over time. The costs of rent, labour, supplies are bound to change in time. This means that, regardless of how thorough your research is (during the planning process), you will have to make adjustments over the course of time. Each of these changes may upset the balance slightly but when the number of changes becomes big enough, you might find yourself in a scenario where your new projections are way off when compared to the old ones. By making adjustments you’ll avoid allowing this to become a problem.
Keep track of cash flow
The next question you need to ask is just how much money you actually have at your disposal. You see, not all the money that you are owed are you going to receive right away. Immediate payments need to be incentivized in some industries but sometimes, you will just have to get accustomed to working with account receivables. Just keep in mind that you’re not the only one that is owed money. You have lenders of your own, as well as those whose services you need to pay for. You have suppliers, employees, shareholders and others to tend to. This is why keeping track of cash flow is so important.
Keep it all in one place
In the digital era, all records can be kept in relatively small files, which means that you literally have no reason to ever delete or overwrite them. This will also allow you to analyze your previous data and your current data, which might just give you enough information for future financial projections. The more data you have, the more accurate your projection will be, seeing as how you will be able to calculate averages quite effortlessly. Also, bear in mind that your own memory is both fallible and subjective. When thinking about the last season, it is quite possible that your recollection of your company’s performance will be slightly off. This way, you can easily check what’s going on.
The last thing you need to understand is the fact that regularly checking your financial plans and your budget is one of the most important things when it comes to your company’s finances. The field is quite dynamic and if you’re not careful and vigilant enough, you might just get left behind.