What figures should you be looking at on a monthly basis?

When building a business, you should create a budget. Over time a budget will provide a useful picture to help you plan and identify areas where you can cut costs and areas where you can grow revenue. The following are examples of steps to take to create a budget:

Income

Look at how much money you are bringing in each month and where that money comes from, for example, if you offer package services as well as an online course or a consultation fee then you need to consolidate the total amounts made to know your income.

Income is usually the most difficult part to get accurate in a budget, try to be realistic and it may be worth budgeting a best/worst and most likely scenario.

Expense

• What fixed costs do you have each month? Add these together to work out your total fixed costs each month.
• Look at your variable costs for things like materials, postage, utilities or travel. A useful tip is to vary these in proportion to your sales increases in the budget. If you know your gross profit margin this will be a good indicator for your purchases for example.
• Factor in any one time spends you know are on the horizon such as business courses or laptops.

Put it all together

Total Income – Total Expenses = Profit before taxes and dividends.

Once you have your budget you should compare it to the actual figures that are reported. The variances will help to inform you on areas of your business that are not working as you expected them to. This will help you to plan and adjust your strategy going forward and drive profit growth.

Contact Woods Russell for help and advice on how to effectively budget for your business.