Simple steps to creating an SME budget

Content provided by a guest contributor.

If you are planning on starting your own business, or if you are an SME business owner who is interested in small business asset funding, you will need to draw up a budget at some point. This budget might be for small business funding to improve your product offerings or even small business finance for finding better premises.

If you are looking into funding for your small business or want to start a business, it is vital to know exactly how to draw up a budget. You will need to take interest rates into account, business development costs, your business plan, as well as the stipulations for business loans.

Once you have taken all of this into account, you will be able to draw up the ideal budget for your every need. Keep reading below for some simple tips on how to create an SME budget.

Start with an easy-to-use document

Now, this might not sound too important but your budget is something that is going to change and fluctuate as your needs do, which means that the document needs to be easy to access and use. Ideally, you and your accounting department should be able to easily access the document.

You could use Google Sheets to create your budget or a simple spreadsheet software so it is easy to read and make changes on. However, be sure it is only shared with the right people and that whoever has access checks with you first before making changes. This document will help you to keep your budget in line at all times and show you how it has changed over time according to your needs.

Forget fixed costs

Well, don’t ignore them completely, but be sure that you have subtracted these from your revenue. The term “fixed” refers to any costs that are the same each month and that are necessary for your business to remain operational. Collect as much data as possible for these costs so that you can accurately calculate your revenue.

Some of the fixed costs that you might have will include your rent, inventory, debt repayments such as car or business loans, taxes, and business insurance. Once you have subtracted these from your revenue, you can now go back over your revenue, as explained in the next point, in order to create a clear and concise budget. Your fixed costs should always be paid and listed on your budget document so they are always paid and never late.

Rehash your revenue

Once you have the right document set out, it is time for you to examine and look over your revenue or income. This means you will need to look back on the revenue that has been coming into your business each month in order to discover how much money is coming into your business on a monthly basis.

Add all of these income sources together so that you have a clearer picture of where your revenue is coming in from too. You will need to look at your revenue before all deductions are taken off, meaning that you should not be looking at your profit just yet. Be sure to calculate the revenue for at least the past six to 12 months so you have a wider idea of your revenue. Look for patterns and changes and make note of these for your budget.

Break it down

It is important to create a monthly budget as well as a yearly one, but a monthly budget will help you to stay on target for the yearly estimation. And this means that you should break down your budget to be monthly rather than annual. This way you will have more control over your money each month.

Your budget spreadsheet or document should be broken down in detail for each month, stipulating the costs and the income for each one, as well as whether or not the costs exceeded the income or profits.

If you have everything broken down into months then you will better be able to see how your business is performing financially. This will also make it easier for you to apply for small business asset funding as you will have a clear indication off what you can afford.

Put it all together

Once you know exactly how to start your SME budget, you can put the steps together and create one that is sure to help you on your way. Start by setting up an easy-to-use document that can be changed and updated as you need it, then move on to subtracting your fixed costs from your income. Examine your revenue and break down your income into months for a clearer picture and a more accurate budget.

 

The content in this article was provided by Rogerwilco – a South African marketing agency based in Cape Town.

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