Producing a 12-month budget
Budgeting helps you pinpoint any difficulties before they occur,
measure performance, and of course stay in control of your
expenditure. It's worth noting that a budget is a planned
outcome of the future, so differs from a business forecast, which
is a prediction. Here's what you need to know about making
- The content
- The structure
- The advice
Your budget is made up of three basic elements: projected
cashflow, costs and revenues. If you haven't worked out your
revenue forecast yet, check our guide on it - likewise for
cashflow. Costs include fixed, variable and one-off capital
costs. Break fixed down into type: rent, equipment, salaries
(your own and any others), advertising, expenses, and so on.
- Three basic elements: projected cashflow, costs, revenues
- Break down fixed costs into type
12-month budgets work best when they've been drawn up on a
month-by-month basis. This helps you predict specific periods
of difficulty, and when you might have a bit of extra cash to
splash. Your budget can start splitting into smaller budgets:
marketing budget, sales budget, and so on - although still use an
overall budget. Spreadsheets are by far the easiest way to
create and revise budgets.
- Draw up on month-by-month basis
- Can split into smaller budgets
- Use spreadsheets
Once you've made your first draft, find ways to reduce
costs. Figure out any periods where cashflow might be a bit
sticky and work out how to avoid problems. Consult an
accountant or anyone you know who has financial experience.
Refer to your budget frequently - at least monthly - and measure
your progress. Revise it if and as often as necessary.
Many successful businesses use a rolling budget that always plans
the next 12 months.
- Cut costs and predict difficulty
- Consult financial experts
- Refer to and revise
- Rolling budgets can be very effective
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