Every business needs a budget whether you’re running a start-up or have been in business for years. After all, how else can you know whether you’re spending money the smartest way possible? Like a map on a long-distance journey, a budget is essential for keeping a company on track and headed in the right direction. Among other things, a budget helps you determine how much money you have, how much you can spend, and how much you need to bring in to meet your goals.
Unsure how to start or what to include? Here’s a good first step.
- Estimated revenue. The first line item for your budget should be your projected revenue. It can be based on last year’s numbers or if you’re a start-up do some research.
- Operating costs. Determine the cost of running your business.
- Fixed costs – expenses that don’t change from month to month, like salaries, rent, insurance, and taxes.
- Variable costs – expenses that vary according to production and sales, like shipping and packaging costs, inventory, credit cards, and sales commissions.
- One-time costs. These expenses are just like they sound. They include software updates, equipment and furniture upgrades.
- Profit margin. Your profit margin is determined by the amount of money left from revenues once expenses are met. This number is a good indicator of the financial health of your company. If the number consistently grows, it means your business is growing. If the number is low or negative, it means your business is spending more than it’s taking in, and it’s time to cut expenses.
- Review regularly and adjust accordingly. Your business goals will change over time. Make it a priority to review and revise budgets at least quarterly or as often as needed.
Creating a realistic budget is critical for the financial success and growth of your business. If you need help developing a budget for a particular project, department, or organization, the Miami CFO team of business, financial, and tax professionals can provide hands-on, personalized service.