Developing a budget can be a daunting task. If your business is new, you may have very little information about what to expect financially, but you will need to operate and manage your business soon. The best budget to start with is a simple cash budget. You need to be as inclusive as you can. You can do this on a monthly, quarterly, or annual basis. If you have access to an accounting software package, check the documentation to see if they have a budget module or example. Here are some important things to keep in your business’ budget and how to make it easier to manage.
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Budget for Income Additions
First, estimate your income. Income sources are generally from the sale of goods and/or services provided by your business. If you are personally loaning your company money, or borrowing from another source, you can include these funds in your income. Be sure to clearly label the sources of any funds.
Budget Daily Expenses
Next, start to itemize your known office expenses. The easiest way is to group expenses around function. Start with office expenses. These will include renting or leasing office space, renting or purchasing furniture, purchase of office supplies, telephone, and internet access, utilities and bank fees. You will want to include loan payments, security systems, computer systems, supplies and software, insurance (health insurance, office insurance, car insurance and so forth). Review in your own mind what expenses you will have just to be able to walk into an office, sit down and turn on the lights. These kinds of expenses are often referred to as overhead.
Business Expenses Budget
Now move on to the cost of either making or purchasing the goods and services you sell. These budget items include raw materials, specific utilities, cost of machinery, transportation in and out of your facilities. If store items for sale later, your cost of warehousing them must be included.
Employee Expenses Budget
Looking at your company from a processing point of view, you have already accounted for setting up an office and acquiring the goods and services you sell, either through purchasing or leasing. Next, you need to know the costs involved in selling these items. This part of the budget should include the costs of advertising, marketing, and sales. If you have a sales staff, include salary, wages, commissions, and taxes. Include the cost of sales tax collected on sales that you will have to remit to your state.
Other expenses for which you will have to budget include loan payments, public relations, conferences and meetings, entertainment, and travel. You might have to pay for extra cloud storage, employment background or drug testing, or temporary recruiting services as you build your team. A category called “Miscellaneous” should also be included. Your budget should include a contingency item. When you create a line item, always write as complete a description of what goes into that category as possible. That way, when you turn your budget and your books over to an accounting firm or on staff accountant, what you have included will be clear.
Starting up a business always seems to be expensive. Knowing how to manage your expenses and finances is important to ensuring your success. Use these tips as you get started improving and making your business better.
AMP Advance is a Miami based industry leading direct funding source out of Coconut Grove, Florida. We help those who are in need of small business financing by providing web based financing options & funding solutions. Our solutions assist small business owners find matching opportunities while assisting small business owners improve their overall financial situations. AMP Advance provides small business loans, business lines of credit, accounts receivables financing, equipment financing, unsecured business loans, and revenue based loans to millions of small business owners nationwide.