WebsitHave you started a new business? If so, one of the first steps you should take is creating a budget to help you stay on track and meet your business goals. The first couple of years when starting your own business are the riskiest times and many companies fail early on due to financial incompetence.
Don’t become a statistic and start out on the right foot by checking out some of these business budget examples to add to your business plan today.
The first thing you need to add to your budget is your revenue. Your revenue should first be broken down into its different components and drivers. Some of the drivers of revenue are typically the volume, such as customers, contracts, products, and units. As well as the price, which encompasses the price per unit, average price, and segment price to name a few.
While you can usually forecast your revenue on a yearly basis, you will usually need to break it down more and review its underlying components. One of the mistakes to avoid when planning your budget is not reviewing the different components regularly and updating when needed.
2. Variable Costs
Once you have determined your revenue you should determine your variable costs. These are called variables because they can be calculated as a percentage and are dependant on your revenue.
Some variable costs are direct selling costs, sales commissions, cost of goods that are sold, freight charges, and direct labor.
3. Fixed Costs
Once you have deducted your variable costs from your revenue your fixed costs will be next. These types of expenses are usually fairly consistent and don’t change despite changes in revenue.
Some of these types of fixed costs are the rent or mortgage for your facility, insurance, utilities, and the salary and benefits of the management team.
4. Non-Cash Expenses
A non-cash expense is an expense that depreciates or gets reduced over time, such as fees in your loan or mortgage. While these don’t affect your cash flow they can impact your overall financial reporting.
Usually, these types of expenses don’t impact your companies performance until the end of the year when creating your income statement.
5. Capital Costs
Your capital costs are not generally factored in when creating an operating budget. Your operating budget should be exclusive to tracking your income and not your capital expenditures.
You should consider creating a separate budget for tracking your capital investments such as the internal rate of return, payback period, and net present value on your fixed assets.
Learn More Today About Adding These Business Budget Examples to Your Business Plan Today!
These business budget examples are the most important items you should be adding to your business plan today. You should be tracking your overall revenue and creating a forecast for the rest of the year. Once you have determined that you can calculate the difference between your variable and fixed costs, non-cash expenses, and capital costs.
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