3 Ways to Construct a Company Budget

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3 ways to constuct a company budget
Everybody needs a Budget
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Having a company budget is like creating a map. It will help you see where you’ve been and where you’re going. You can use that map to decide where you can cut costs, where you can and should expand the business, and to confirm that you’re staying within the financial constraints of your business.

Analyze Where You Came From

Image via Flickr by 401(K) 2013

When constructing a budget for your company, the first step is to analyze past expenses. If your company has been in business for a year or longer, use invoices, receipts, and other results to create a clear idea of where your money is coming from and going to.

You can track this information in a few different ways. The best way is to group together similar items. For example, for expenses group together overhead, raw materials, staff, utilities, etc. For incoming cash flow, group together sales of specific products or types of products, similar services, etc. Do this for each month so that you can see how the numbers change throughout the year. Look for causes of dips and peaks of money.

If you haven’t been in business long enough to do this, use research in place of experience. Talk to vendors, estimate costs, and interview other business owners, preferably ones within the same industry. Many websites can offer you tips and tricks which will tell you about investments strategies in order for you to find more information about your finances.

Decide on Where You’re Going

Once you’ve determined what you’ve spent in the past, or researched potential costs and sales, next you’ll want to start filling in the blanks. Using a spreadsheet or budgeting software, create a finance budget that includes fixed expenses, variable expenses, and estimated income. You’ll want to do this for every month for the next 12 months so you can get an idea of where you’re headed for the next year. Remember that each month will be different. There will be changes that vary throughout the year, like having increased sales because of Christmas.

Once you have a clear picture of what your budget will be in the coming year, create a plan for the two years beyond this with a general guideline per quarter. Set goals for your company that may include increased sales, expanded line of products or services, and increasing your workforce.

Track It, Each and Every Month

Once you’ve created the budget, you’ll want to keep track of projected expenses and income with real expenses or income. By knowing what the differences are and then analyzing why there’s a difference, you can use it to decide what needs to change. It could mean cutting out unnecessary expenses, moving to a smaller or larger office, or focusing more on a product that is doing better than expected.

This should be done at the end of each month to see where your company is at. Then use it to revise the next month’s budget. As you use these checkpoints to determine where you’re at, you can be sure that your company is moving in the right direction.

It’s easy to deal with business expenses and income as they come in, but by having a plan, your business is more likely to succeed and thrive.

Comment if you have other company budget ideas?

One thought on “3 Ways to Construct a Company Budget”

  1. Tracking your budget is so important. I just read a survey that said 56% of people don't budget. It shocks me how clueless people are about their money.

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