Prepare a Budget for the New Year

The Details:

A written budget is important for any business. It doesn’t have to be long or complex. For a small business, a simple budget might be all you need. At the end of each year, it is wise to budget out the next twelve months. A budget has a section for income and a section for expenses. Each row is labeled with the type of income or expense and each column is labeled with the month. (See example below.) You will use historical data to create a baseline for both income and expense.

Once you have the baseline created you will add in any new income or expense projections for the year.

The Budget Formula: Income - Expenses = Projected Net Gain or Loss

Prep Work:

Gather the following items:

→P&L by month for 2020 – This helps to find your fixed and recurring items.

→Balance sheet detail by month for any loan accounts in 2020 – This helps make sure you don’t forget to budget for any loan amounts.

→New income or expense contracts for 2021

→Information on new income-producing activities

→Information on new expenses. Such as those relating to new income-producing activities (advertising campaigns, staff, equipment, etc.)

PRO TIP:

√Make sure your accounting system is updated before trusting reports from your system.

√Update the budget throughout the year with new information.

If you are new to budgeting, check out our E-Book for more details on this process.

For templates and step by step instructions, check out our signature course, which includes a budget module.

The article is for informational purposes only and should not be construed as business, accounting or legal advice. Details are subject to change without notice.