How to Create a Corporate Budget?
A corporate budget refers to the process of estimating and forecasting your business finances. Once this is settled, you may begin to create detailed planning for efficient financial management for your company.
As a business owner, you need to figure out a lot of things for your company. Statistics show that many businesses were reported to have lost millions for a failed project in 2015. Creating a detailed business budget plan can create a road map for your financial success, altogether expanding your business opportunities.
1. Examine Your Revenue
Look back and examine your previous and current revenues. Compare any similarities and differences in their output and discover income sources that may benefit your company plan on a monthly and annual basis. Examine how many changes occurred during these periods and prepare for any seasonal changes. Include factors such as your taxes, policies, and your personnel's travel and operating expenses in your monitoring your budget calculations.
2. Subtract Fixed Costs
The second step is to create a simple budget that adds up all your fixed costs. Fixed costs commonly apply to your recurring operations in the business. They may occur on a daily, weekly, monthly, or yearly basis, so take note on these fixed costs that might be associated with your business. Once you identified everything, try to minimize these costs from your income.
3. Determine Your Variable Expenses
Along with your fixed costs, determine your variable expenses as well. Variable expenses change how much you use a service. Some examples are your utilities and equipment, office supplies, marketing costs, and other professional development for your employees. Identify necessary variable expenses form your business and reduce them during lean months. At the same time, you increase them during profitable months when you have extra income. What matters most is to have a good judgment on when to make changes.
4. Prepare a Contingency Fund
Anything can happen in business and you may never expect them to come. Prepare a contingency fund to give yourself extra cash when emergencies and unwanted events may occur. At least you will be ready to quickly respond to calamities and damages on your inventory and management.
5. Make a Profit and Loss Statement
Once you have collected every important information for your corporate budget, it is time for you to create your profit and loss statement. Add all your income for the month, do this as well with your expenses for the month. You subtract your expenses from your income and hope to get a good profit.
6. Create Your Projections
May you be a newbie in business or an old-timer, you still need to create your projections for your corporate budget. Have a plan outline of your budget, refer to your profit and loss statement, and understand the seasonal ups and downs of your business. Check for good investments for your company and avoid things that may deplete your profit in the future.