How to create a budget 

Monitoring and budgeting your finances is critical for the success of your business. This guide will take you through the steps of creating an initial budget that you can set up to monitor the financial health of your venture, even if you’re not generating any income yet. 

What you’ll need: 

• 60-90 minutes. 
• Pens, notebook, laptop, or your preferred notetaking method – a spreadsheet is advisable. 

Steps: 

Predict your expenses. 

Your expenses are the money that is leaving your account. Expenses can be fixed (they stay the same all the time), variable (they change from month to month), or one-off (you only need to pay for them once). If you don’t know these yet, estimate what they might be, and add them to your budget. Remember, your wage is also an expense. 

Estimate your income. 

Your income is the money that is coming into your account from your business. For this, you would predict the number of sales and multiply this by how much each sale is worth. Again, if you don’t know how much you’ve made, you can use an estimate. If you have received a grant, you would also want to add this to your income. 

Track your loss or profit. 

Once you have each of these figures (either real or predicted), you can calculate whether you’ve made a profit or loss for the month. To do this, you would subtract your expenses from your income. If you end up with a positive number, this indicates that you could be on track to make a profit. If you end up with a negative number, you’ll potentially make a loss – if you don’t make any changes. 

Review your budget. 

You should keep checking your budget and keep it up to date. Having an up to date budget can help you determine whether your business is doing well or whether it is struggling. If you’re consistently in profit, your business is doing well. You may want to think about how you could increase your profits, or even consider expanding. If you’re making a loss, you might want to think about ways you can cut back on spending, or ways to change your business plan to draw in more customers and therefore more income. 

Create an emergency fund. 

Problems can arise for even the most cautious ventures. Make sure you have an emergency fund set up to deal with a problem if it arises without having to cut into your revenue unexpectedly. Keep your emergency fund updated and only use it in emergency situations – it isn’t spare cash. 

 

Further Support 

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