So you are starting a new business and you have to create a financial budget. Most people are intimidated by the budgeting process and don’t know where to start. A basic budget can be broken down into several categories:
1) Income or Revenue
2) Building Rent / Maintenance Expense
3) Wages / Salaries Expense
4) General & Administrative Expense
The basic concept or goal is that your expenses should not be a higher amount than your income or revenue. Your budget is basically a projection or guide to your financial plan. You can keep your budget basic or as detailed as you want. Microsoft Excel is great to create budget spreadsheets. You can find free budget templates on www.microsoft.com.
The first section of your budget is how much income you project to receive rather it is from sales of products or income from services you provide. A good rule of thumb is to be conservative with your income projections. Basically you don’t want to project income will be $5,000 a month when in reality you can only bring in $2,000 a month. It is better to bring in more income than you project verses less income than you project.
Your expenses include building costs (rent, maintenance, repairs and utilities) wages (salaries) and general & administrative which would include all other operation expenses for example, office supplies, web design and maintenance, printing and marketing/promotions, etc. You will need to know what resources you will need to pay for in order to provide the services or products to your customers or clients.
When trying to figure out how much your operation costs will be you must keep in mind that these are projections. You can get quotes for certain costs and uses those as projected amounts. Again, keep in mind that a good rule of thumb is to pad your projected expenses so that basically you will come under budget than over budget on your spending. So if you think you will spend $100 on printing it is good idea to project $150 to $200 a month as a cushion in case your printing costs you more.
It is also a good rule of thumb to consider your budget as a working budget meaning you may need modify or adjust your budget once you actually start receiving and spending money.
It is a good rule to review your budget performance quarterly and/or monthly so you know where things are.
It is also good to invest in a money management software such as QuickBooks to help you with managing your business finances. QuickBooks also offers payroll service as well as merchant account services to process credit card payments from customers.
For more information on QuickBooks go to www.intuit.com.
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