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A budget is a plan incorporating all income and expenditure that relates to a business for a period of time in the future, usually 12 months. It will help you to determine seasonal periods and allow you to manage your cash flow – often you will have to pay out for goods before you receive any money from sales.
A budget allows you to monitor the progress of your business against your goals for the business. Monitoring it on a regular basis will allow you to identify early on areas of your business that may need to be improved. A budget is always prepared in conjunction with your marketing strategy.
How to prepare a budget
The figures used are based on projections, estimates or the previous year’s figures. A budget is prepared on a monthly basis and should only include figures that relate to that period - for sales and expenditure that you need to spend to make that sale, do not include amounts for stock purchased if the stock is not going to be used within that specific period. These figures are usually excluding GST. There are three areas that you need to focus on:
- Sales
- Direct Variable Costs
- Overheads
- Profit or Loss
TIPS
- Be realistic about the figures you project
- Complete a budget for each month over a 12 month period
- Start preparing your budget at least 6 months before the period of time you are budgeting for
Click here to download a Budget template
More information is available on the website, including:
- How to prepare a budget?
- What figures to include?
- Downloading a budget template
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