How to set your business budget
Doing a business budget allows you to plan your business finance so that you can pay your bills and suppliers on time. They encourage you to forecast your future income and expenses.
There are a number of methods you can use to set your business budget. Below are some of the most common.
1. Using last year’s budget as a guide
You look at all your actual income and expenses over the last and perhaps add a little bit on to allow for inflation.
2. Activity-based budgeting
This method works backwards by forecasting the oncome you want to achieve and then working out the expenses you’ll need to have to achieve your income goal. For example, you might need to employ more staff to increase your revenue and profits.
3. Zero-based budgeting
Zero-based budgeting is based on each expense items in the budget starting at zero and then being justified for inclusion in the budget at an amount that isn’t based on last year’s figures.
It helps to eliminate budgetary amounts automatically being included just because they always have been.
What’s the most important part of budgeting?
There are two important aspects to budgeting:
Setting a realistic budget
Regularly monitoring the budget once it has been set to identify any potential discrepancies between what has been forecast in the budget and what is actually happening. For example, income may be lower than forecast or there may be unexpected expense blowouts. The earlier any problems like this can be detected, the earlier corrective action can be taken to try and solve the problem.
How we can help
At Scorpion Bookkeeping, we can help you to implement Xero bookkeeping software to help you to budget your business finances. We are a Xero-certified partner.
We also provide bookkeeping support services to a diverse range of clients in Victoria, South Australia and New South Wales.
Contact us today for a free, no-obligation consultation to find out how we can help your small business!