How to create a business budget
How to create a business budget
A budget basically shows you how much money you have coming in (your revenue) and how much you spend (costs). When your revenue is higher than your costs, your business is profitable, when your costs are higher than your revenue, your business is running at a loss.
Many businesses run at a loss at the beginning of their life-cycles because of borrowed capital. But the gap between debt and profit needs to narrow and eventually close for a business to survive.
Record keeping is really important so that you know exactly how much money your business is bringing in and how much you’re spending as well as what your assets are worth (property, equipment, furniture and other items that have a value (you would get money for them if you sold them)).
Remember to always work with either all VAT inclusive or all VAT exclusive amounts.
Your budget must include the following costs:
- Marketing, advertising and PR
- Personnel (staff)
- Fleet (company cars and trucks etc)
- Equipment
- Rent or property loan repayments
- Utilities bills
- Insurance and policies
- Purchases, like coffee, cleaning materials
- Tax and VAT
Here’s an example of a budget:
|
January |
February |
March |
April |
May |
June |
|
|
Revenue |
||||||
|
Sales |
R 100,000 |
R 150,000 |
R 150,000 |
R 100,000 |
R 100,000 |
R 100,000 |
|
Costs |
||||||
|
Rent |
R 40,000 |
R 40,000 |
R 40,000 |
R 40,000 |
R 40,000 |
R 40,000 |
|
Etc (list all costs here) |
R 105,000 |
R 95,000 |
R 100,000 |
R 110,000 |
R 122,250 |
R 111,000 |
|
Profit |
-R 45,000 |
R 15,000 |
R 10,000 |
-R 50,000 |
-R 62,250 |
-R 51,000 |
It’s important to get your budgeting right, especially for a business, because one mistake could cost the company thousands or even millions of rands.