What to Know About Budgeting and Projections
Budgeted Balance Sheets
A budgeted balance sheet gives you all of the information a balance sheet would, except it’s projected.
Your balance sheet includes an estimate of expenses for each of the accounts in your company. Some general accounts are cash, accounts receivable, accounts payable, payroll taxes, utilities, inventory, and other more customized accounts.
Basically, you set up an account for each item/service/product that you spend money on. For example, if you spend a significant amount of money on keyboards, you’d ideally make an account called, “Keyboards” and track how much you spend on keyboards every fiscal period. Read more about budgeted balance sheets below.
Budget projections help you secure loans and attract more investors because they will all know approximately what the future of your business looks like.
Estimating the sales revenue needs to be your first step when starting a budget projection. You need to base your sales revenue on previous sales revenue, current market trends, and marketing strategies to get an accurate projection.
Here’s a free business startup cost calculator, see what your costs can be.
Think of Variable Costs in Your Budget
If you sell anything, whether it’s a product or service, you need to consider any variables in your expenses. You need to think of sales commissions, any shipping costs, extra labor needed to get the job done on time, new equipment, and any other unexpected expense.
Calculate Your Recurring Business’ Expenses
Some of your recurring salaries are rent, phone bills, business fees’, financial fees, insurance for your employees, equipment/inventory, utilities, payments on any business loans, advertising costs, and any other cost that you know you’ll have next month.
Simple Expenses for Startups
Some of the basic expenses you’ll have as a start-up is the cost of equipment (software, tool, inventory), legal fees to set up your business, office rent and advertising.
The most important expense being your own pay in case no clients come through the door, which usually happens during the first few months.
The Most Important, Budget Your Net Income
Let’s say your projected sales revenue is $40,000. I gotta say, that’s a pretty good amount of money to make, but if your variable expenses were $15,000. The cost to start the business was $10,000 and your recurring costs were $10,000. That means you’re out of money.
Projection accounting basically means your predicting all future expenses in your company, not just your budget. Like the budget projection, this includes predicting your revenues and expenses based on historical data, market trends, and marketing efforts from your part.
Our cash budgets give you a short version of our Budgeted Cash Flow Statements.
To get accurate numbers we’ll think of marketing efforts and other factors that influence the inflow and outflow of cash in your business.