A small business budget - How to make one and when it comes in handy.
Are you uncertain about how much revenue you need to cover your costs, how VAT influences your cash flow, or how to make a budget for the bank when applying for a loan? If this is the case, it would be a good idea to make a budget.
This simple guide will show you how you can make a budget for your small business. And on top of that, we will provide you with a free Excel Business Budget Template. which is specifically made for small and medium size businesses. Spoiler alert: it doesn't require any financial background or hardcore Excel skills!
9. September 2022 • 3 minute read
What is a budget?
A budget is a financial forecast of the economical health of your business. It basically tells you whether you (can) make money or not. It might sound greedy, but making money is as crucial for your business as eating food is for your body. You might be able to do it for a while, but if you don’t make money at some point, your business will close down.
If you want to avoid financial surprises like VAT payments, running out of cash in the down season, or if you need to convince a banker to provide you a loan, a business budget comes in handy. For instance, you can make a budget to get an overview of the month-over-month income, the expenses, the amount of cash in the bank, VAT payments, etc.
A budget is useful in different situations, here are a couple of examples:
The startup phase
Your business is sensitive to seasonal fluctuations
To analyse the effects of making discount offers
The startup phase
A budget will tell you whether your business model is economically sustainable or not. It will provide an idea of how much money you need before you turn a profit. This is useful when convincing a banker or investor to provide you with a loan or an investment.
Your business is sensitive to seasonal fluctuations
A budget can give you an idea of how much money you need to make in the high season, in order to cover your costs in the low season.
To analyse the effects of making discount offers
A 15% discount on your products might not seem like a lot in terms of revenue, but when you subtract all your costs, the discount might turn your profit into a loss. You can use a budget to see how changes like that affect the bottomline.
Summary.
Maintaining a business budget can help you prevent negative financial surprises, and in order to make this it as easy as possible, we created a small business budget template for you! It is fairly easy to use and does not require a financial background or hardcore Excel skills. Just follow the guide in the link below, and you're good to go!
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