So the budget is the last, but certainly not the least of the BIC+B group of financial statements every entrepreneur needs to know . Most financial experts often exclude this “forgotten sheet” from financial management documents. I love business budgeting and believe that it should be a part of your regular financials review routine!
What is a budget?
A plan for allocating the resources and spending in your business. It also aids in managing business operations efficiently and making effective decisions.
There are different types of small business budgets. However, I like to recommend the following types to my clients:
Operating budget – an estimate of revenues and expenses that are related to running your small business. It also shows your anticipated net income/loss.
Sales Budget – estimates anticipated sales and often used to develop sales goals.
Cash Budget – estimates cash receipts and expenditures for a specific time period. A great tool for entrepreneurs to determine the timing of cash and the ability to cover costs. It’s also critical in forecasting the capital needs of your business.
Why Budgeting Is So Important for the Entrepreneur?
In a previous article I listed several reasons why small business budgeting is critical for the entrepreneur. However, one of the most important reasons is that a budget provides a roadmap of where your business is headed. It is also a financial controls mechanism for ensuring that you aren’t spending more money than you should be.
Get In The Know Tip: A budget is a living and breathing financial management document for your business. It only works if you use and review it on a regular basis!