Business Budget Planning

Business Budget Planning-58
This would include analyzing the budgeted versus actual results on a quarterly basis and helping reforecast accordingly.We can also perform industry and economy reviews to assist with the reforecasting process and provide benchmarking data.However, an annual budget should be monitored and updated on an ongoing basis, so it’s never too late to get started. Furthermore, budgets should always be compared to actual results to understand why there are differences.

This would include analyzing the budgeted versus actual results on a quarterly basis and helping reforecast accordingly.We can also perform industry and economy reviews to assist with the reforecasting process and provide benchmarking data.However, an annual budget should be monitored and updated on an ongoing basis, so it’s never too late to get started. Furthermore, budgets should always be compared to actual results to understand why there are differences.

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Budgeting is often a task that is not a key focus of small and mid-size businesses, but it should be. Well, most importantly, the process prepares you to answer the following questions about what the next 12 months will look like for your business: These questions (and many others) are typical of investors, financial institutions, and potential strategic partners and financial buyers.

Every business, regardless of their size, should have these answers so they can plan the annual budget accordingly.

You might not care about the distinction, but standard accounting and finance do, and, more important, the government does. So take a couple minutes to understand the distinction. A word about words: Is it start up costs, start-up costs, or startup costs? I like things in writing to go according to predictable rules. On the one hand, you have people telling you that you need working capital, and on the other, you have to raise it somehow or take it from your own savings and invest it in the business to make it cash on hand. Expenses like rent and payroll are startup expenses until your business is up and running; after that, they are just running expenses, that come out of your profits as deductible against income, so they reduce your taxable income.

These will be deductible against future profits, so they will eventually reduce taxes; at least they will if you ever make a profit. These include spending on rent, payroll, travel, meals, consulting, most (but not all) legal expenses, and so on. Assets are things like signs, furniture, fixtures, cars, trucks, buildings, land, and — harder to deal with — cash on hand and inventory on hand. It seems like the toughest estimate to make is what you will need as cash on hand when you start the business.

These can be different considering that you may pay your bills faster than your customers pay theirs or you may need to purchase inventory well in advance of sales if acquisition time is significant.

A cash flow statement can be created using the income statement as well as AR/AP turnover rates and other metrics from the balance sheet.

There’s a lot of potential confusion about startup costs. Make two simple lists, one of expenses and the other one of assets.

You tend to jump right into one of those accounting vocabulary problems that often trip people up, because they want to make things mean what they ought to mean, instead of what standard accounting and financial analysis make them mean. You’ll need this information to set up initial business balances and to estimate start-up expenses, such as legal fees, stationery design, brochures. The following illustration is a typical start-up table for a homebased office, service business — in this case a resume writing service.

Money you spend on assets isn’t deductible against taxable income, so the bookkeeping is different, like it or not.

The assumptions used in this illustration show how even simple, service-based businesses need some start-up money. Part of the planning for a startup is figuring these numbers out.

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