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Creating a Business Budget

It is an exciting time to be an entrepreneur. The number of opportunities and avenues for companies to access information and track their spending is unprecedented. Many companies choose to do their bookkeeping while they are starting out, however, the duties become more time-consuming and laborious once a business is established due to pressing obligations in other areas. Once companies are financially able to take on more employees, bookkeepers are one of the first additions to be hired. They can be hired on an employee or on a contract basis and work as often or little as needed. This allows the owner to have some relief from the tasks usually associated with bookkeeping job duties while ensuring the books are accurate and up to date.

A bookkeeper will help you choose and set up a software program that best suits your business needs. At this time, the bookkeeper will go over questions regarding the financial state of your business and inquire about your budget so they can help you track your performance. They will use software to help ensure your records are complete for reporting, decision-making, and tax time. They will also help you create a budget for your business.

Budgeting is an important part of the decision-making process regarding tracking expenses and assessing their necessity, such as staff increases and equipment purchasing. If a company is over budget, the business plan may need reassessment and modification. Your bookkeeper can ensure you have the right budgeting plan to help your company pay down incurred debt setting you up for long-term success.

A budget is a spending plan for your company based on income and expenses. There are different types of budgeting a business should do in order to be set up for the most success, like:

MASTER BUDGET - used to plan business goals and the activities needed to achieve them. It uses information from financial statements, financial plans, and cash forecasts.

OPERATING BUDGET - business's projected revenue & expected expenses for a set period. It is similar to a profit and loss report. It includes variable, capital, and fixed costs, as well as non-operating expenses. This budget makes sure the business is spending according to plan. It is run at the beginning of every year, and updated periodically for reference, usually quarterly.

CASH BUDGET - an estimate of money entering and leaving for a given period. It is created using sales forecasts, production, and estimated payables & receivables. This shows if money is used productively, you have operating liquid cash, and the company is on track to earn a profit.

FINANCIAL BUDGET - shows capital needed and time frame for short- and long-term needs. This report uses assets, liabilities, and equity (balance sheet components) to deliver business health.

LABOR BUDGET - determines the workforce needed to assess your goals to plan payroll.

STATIC BUDGET - an estimate of fixed revenue and expenses for the year. They are usually prepared for educational, government, or non-profits with fixed spending for activities.

Talk to your bookkeeper about setting up the right budget for your business. This will help you make educated and informed financial decisions for the health and success of your business, also ensuring you stay on track for long-term growth.


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