3 THings you need before you make a budget
Before you even start to create a budget, you need to gather some information and do some planning. Here are a few things everyone needs before they start budgeting, no matter what type of business they own.
Prior Year financials
If you have been in business for more than a year, then you will want to have your Income Statements & Balance Sheets from prior years. Up to 5 years would be ideal, but whatever you have will help. If you have not started your business yet, or haven’t been in business for very long, collect any financial data you have available. Bank statements showing expenses you’ve paid and a business plan that has projected numbers are examples. If you don’t have any data, that’s OK!
Goals for the coming year
A big part of budgeting that not everyone remembers is creating goals. It is hard to budget if you don’t know what you want your business to look like or what you would like to do in the coming year! You need to know what you are budgeting for, so make sure before you start to have a list of your goals and the money you may need to achieve those goals.
There may be changes happening in your business in the coming year that you already know about. These may include rent increases, insurance cost reduction, or payroll increases. They may also include changes to your revenue, such as a new project, decline in revenue of certain products due to supply chain issues. Make a list of all of the known changes coming in the next year, not just ones you think may happen.
Again, each business may have more specific items that they need, but this is a general list of items that all businesses need before they start to budget. Next week we’ll begin to build the budget!