Making a budget

Making a budget enables you to plan your business better. You obtain a picture of what creates profitability and can keep a check on finances, ensuring bills can be paid.

Start-up budget

In the start-up phase, you may need to make investments to ensure your business can actually get off the ground.

A start-up budget shows the costs you will incur in the very short term and your ability to finance them. It also includes the invoices you will have to pay in the start-up phase.

Profit budget

A profit budget is a summary of the company's expected income and expenditure and the projected profit for a particular period. The most difficult thing to estimate is how much you will sell, in other words what your income will be. Before you can make a profit budget, you need to have considered

• your range of products/services
• product/service costs
• who your customers are
• your costs
• how much you must sell to cover your costs, per day, month and year.
  

Control with a budget

A budget is not a mirror of reality, but an economic plan with hopes and expectations. It is best not to get bogged down in finer details, but to look at the basic outlines. A good budget shows the business's problems and opportunities. A realistic budget helps to achieve business goals.

Cash flow budget

To avoid unpleasant surprises in the form of sudden bills to be paid, the company must have liquidity. This means the company must have access to cash every month. A cash flow budget shows the difference between the money coming in and the money going out month by month.

A profit budget shows whether the business is making a profit or a loss, while a cash flow budget shows whether there will be enough money to cover the month's expenditure.

Six months at a time

The ability to pay bills is essential to a company's survival. A cash flow budget is therefore at least as important as a profit budget. Make a cash flow budget for the next six months, and then keep it current to ensure you have a constant overview of the company's ability to pay over the next six-month period.