A new financial year is like a fresh start to your business. The new financial year comes full of opportunities and new ideas for the existing business structure. Many of us love this time of the year for some new resolutions to make for the business.
A simple way to start the year is to make a budget. Budgeting for business owners is an essential part of understanding what you need to do to help your business be a success in the new financial year.
We have got a different approach to setting a budget, which is the bottom up. First start by deciding how much profit you want to make, then review all expenses and try to reduce costs to get the targeted profit.
E.g., you decided to make a profit of $50,000. Your operating cost sits at $140,000 and direct costs are around 200,000. To achieve the targeted profit your annual revenue needs to be $ $390,000.
Following are easy steps for building a business budget:
First, decide how much profit (after paying your own salary) you want to make at the end of the year.
First, start by identifying your fixed costs and estimated fixed costs. Which includes mobile charges, internet, insurance, car registration and other expenses which you must pay every month. Try to reduce expenses if you can. Small changes make a big impact at the end of the year.
Direct cost is the cost that is involved in making your product or service. These costs are difficult to reduce, but still, you can look for some saving measures.
Revenue: Add profit + operating costs + direct costs
Now you have an idea how much revenue you must make to get the targeted profit. Make some strategies to achieve the target. Think do you have enough team and support to achieve the target.
Encourage the team to accomplish the goal each month.
Once you have worked out your cost and revenue, you will need to start breaking it down month-by-month for the whole year. This will give you a more clear picture and target for each month.
Go through each month and determine whether you want to increase or decrease your monthly expenses based on the results of your monthly planning.
Create a Budget Document
Too many businesses do not make the budget document, they think just the normal calculation is enough. But in fact, it is wrong. By making an actual budget document, you can keep a track of your business and everyone in the team can easily understand too.
Budgeting for business owners in the new financial year is very important. It will give you guidelines about what you can spend and when, so you know when it’s time to grow your business or hold back.
If you have any questions about your business budget, get in touch with us today. We can help you sort out your expenses and costs for the year and give you the best service to achieve your target.