Why budgeting is important

The estimation and calculation of expenses and revenues, whether real or anticipated, are of great importance. Budgeting helps business owners determine whether they have enough funds for business operations to expand the business and generate revenue. Without considering a budget or a plan, a business risks spending more money than it could cover through its activities. There is also the reverse – which is equally risky – of not spending enough money to grow the business.

Budgeting is the most efficient way to control your business cashflow by helping you invest when it’s appropriate. If your business grows, you’ll notice how budgets go to different areas, such as production, sales, marketing, taxes, taxes. Thus, the budget ensures that you have a clear and re-listing view of the expenses you have.

Creating the budget

Creating a budget helps you allocate financial resources where necessary, so that your business is profitable and successful. It doesn’t have to be complicated, but you simply need to work on the amounts of income and expenses you have over a period of budget time.

Questions to ask yourself:

What are the planned sales for the budget period? Be realistic – if you overestimate, this will create a problem for you in the future.

What are the direct costs of sales – for example: the cost of materials, components or subcontractors to make the product or provide a service for the production of the product.

What are the fixed costs or expenses? Here you need to include: the cost of spaces, including rent, taxes, taxes, personnel costs, utilities, equipment costs, consumables, advertising and promotion, travel and business travel, legal and professional costs, insurance, etc.

Your business may have different types of expenses, so it may be necessary to budget by departments or other criteria that match the reality in which you operate. Don’t forget to add your own salary to your budget.

Once you have outlined your budget, you must stay true to this planning as much as possible, but when necessary make the necessary adjustments and revisions. Whatever you do, keep an eye on the budget. It’s vital.

What the budget will have to include

Fixed costs – remain constant, they can refer to: utility bills, rent, salaries, taxes, taxes

Variable costs – vary depending on the company’s activity

Semi-variable costs – are partially fixed and partially vary, depending on the volume of activity. For example: hiring temporary staff due to workload, using one-off consulting services, changing equipment or part of it.

Revenues – sales or revenues are estimated taking into account sales history and expectations of what they will be like in the next period and what efforts will be made to achieve them.

With an estimate of revenue and expenses you can determine what profit you expect your business to have in the next 12 months.

Conclusion

The budget realized and spent of the business is an important tool that indicates the health of the business, its profitability. In order to have a real utility, this budget must always be subject to periodic analysis and review (loading of information, verification and analysis of results), otherwise it can lead to anomalies that would provide erroneous data.

When investing time, effort and money in a business it is very important to have experts with you to support your approach and to know how the mechanisms to support a profitable business work closely. We are only a phone or mail away to provide you with the information and services you need.