A budget is a financial plan and essential for a business to succeed
It’s a list of
all expenses and revenues.
Also a plan for saving and spending.
This is the “Balancing Act” part.
A Budget helps to aid the planning of actual
operations by forcing business owners/management to consider how the conditions
might change and what steps should be taken. And by encouraging the business
owner to consider problems before they happen.
Monitoring all positions (revenue in and
expenses) on a routine basis which has the tendency to change. So must the
business owner.
This is ‘Adaptability”
A Solid Budget is necessary to:
Control Resources
To Monitor Expenditures
To Provide
Visibility into the Company's Performance
Cash Flow/Cash Budget – a projection of future
cash flow and expenditures for a particular time period.
It usually
covers a period in the short term future. The cash flow budget helps the
business determine when income will be sufficient to cover expenses and when
and if the company will need to seek outside financing.
Marketing Budget – an estimate of the funds
needed for promotion, advertising, in order to market the product or service.
Project Budget – a prediction of the costs
associated with a particular
business/company project. These costs include labor, materials, and
other related expenses. The project budget is often broken down into specific
tasks, with task budgets assigned to each. A cost estimate is used to establish
a project budget.
1. Watch your cash flow. If you want to stick
to a budget, make sure that your cash inflow is more than your cash outflow.
Monitor your income closely to make certain that you'll have adequate funds to
pay your bills, particularly if your business is prone to long lapses between
cash in-flow/revenue.
Cash-flow
problems are what kill most small businesses. Keep checking to make certain
that your revenues match your expenses.
2. Lean on the side of being conservative
(underestimating cash inflow). When setting up your budget it’s a good idea to
overstate (over estimate) your expenses and low-ball (underestimate) your
expected revenue/cash flow. That approach is also a solid strategy when making
sure your cash flow is going to hold up. Look into saving money and budget
savers.
"Money
you don't spend is money you don't have to earn."
Or “Money Saved is Money Earned”.
3. Build a cash cushion. The uncertainty of
budgeting — both in terms of income as well as expenses — stands as one of the
biggest threats to the survival and success of any small business.
Trimming expenses
to the bone is a good idea. It's also smart to set aside income whenever
possible. If you can afford it, allocate a portion of every paycheck you get
and put those funds away. It can prove
an essential lifesaver should an unexpectedly high bill suddenly crop up and
usually does at some point in the life of a small business.
James J. Pastore, SCORE
Counselor/Consultant
visit us at: www.scoresouthflorida.net
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