For many Start-ups and small-business owners, the process of budgeting is limited to figuring out where to get the cash to meet immediate needs. But what really is Budgeting and how does it help Start-ups and small businesses.
There some definitions to budgeting but to simplify it budgeting is a plan to meet a specified goal and a comparison between actual results and plan. Budgeting allows you spend money on how, where and when you want to.
On the other hand, not budgeting makes you feel like you are not having enough money for what you need. Business budgeting is one of the most powerful financial tools available to any Start-ups and small-business owner maintaining a good short- and long-range financial plan enables you to control your cash flow instead of having it control you.
Most startup and businesses owners especially the ones in their first year, Find it difficult balancing and budgeting for their Start-ups like they say if you fail to plan you plan to fail.
Many financial budgets for Start-ups provide a plan only for the income statement; however, it’s important to budget both the income statement and balance sheet.
This enables you to consider potential cash-flow needs for your entire operation, not just as they pertain to income and expenses.
‘In the startup phase, you will have to make reasonable assumptions about your business in establishing your budget.
In making your budget as accurate and precise as possible you need to ask the following questions we compiled it to give you an understanding of what you need for making your budgeting easy.
- How much can be sold in Year 1?
- How much will sales grow in the following years?
- How will the products and/or services you are selling be priced?
- How much will it cost to produce your product? How much inventory will you need?
- What will your operating expenses be?
- How many employees will you need?
- How much will you pay them? How much will you pay yourself?
- What benefits will you offer?
- What will the income tax rate be?
- Will your business be a Sole proprietor or a Ltd corporation?
- What will your facilities needs be?
- How much will it cost you to rent or debt service for these facilities?
- What equipment will be needed to start the business? How much will it cost?
- Will there be additional equipment needs in subsequent years?
These are part of the key questions to answer carefully in order to create a good Budget As for the actual preparation of the budget, you can create it manually or very importantly outsources it to professionals in order to enable focus on the core of your business As for outsourcing you’re Budgeting, Bookkeeping and tax and revenue related issues, I recommend AccountingHub and Morgategroup they offer flexible plans for Start-ups and small businesses.
Putting into consideration consistent advance in technology, there are software packages to handle your accounting and bookkeeping issues, I recommend SageOne, it is a cloud-based accounting and bookkeeping software package it makes it easy for businesses to budgets properly.
Whether you budget manually or use software, it’s advisable to seek input from your CPA (Certified Public Accountant) in preparing your initial budget.
You may want to hire a CPA (Certified Public Accountant) to prepare the financial plan for you, or you may simply involve him or her in an advisory role. Regardless of the level of involvement, your CPA’s input will prove invaluable in providing an independent review of your short-and long-term financial plan
Planning and budgeting give precision and accuracy in spending and allocating funds properly to the important and necessary aspect of your Startups and businesses that support your long-term goal scalability and growth.