![]() ![]() What will the collateral be? What will the interest rate be?Īs for the actual preparation of the budget, you can create it manually or with the budgeting function that comes with most bookkeeping software packages.What payment terms will you offer customers if you sell on credit? What payment terms will your suppliers give you?.What equipment will be needed to start the business? How much will it cost? Will there be additional equipment needs in subsequent years?.What will your facilities needs be? How much will it cost you in rent or debt service for these facilities?.What will the income tax rate be? Will your business be an S corporation or a C corporation?.How many employees will you need? How much will you pay them? How much will you pay yourself? What benefits will you offer? What will your payroll and unemployment taxes be?.How much will it cost to produce your product? How much inventory will you need?.How will the products and/or services you are selling be priced?.How much will sales grow in the following years?.In the startup phase, you will have to make reasonable assumptions about your business in establishing your budget. In the future, a budget can also help you determine the potential effects of expanding your facilities and the resulting higher rent payments or debt service. For instance, if you're planning to purchase real estate for your operation, you need to budget the effect the debt service will have on cash flow. For instance, if you had already been in business for a few years and were adding a new product line, you'd need to consider the impact of inventory purchases on cash flow.īudgeting only the income statement also doesn't allow a full analysis of the effect of potential capital expenditures on your financial picture. This enables you to consider potential cash-flow needs for your entire operation, not just as they pertain to income and expenses. Many financial budgets provide a plan only for the income statement however, it's important to budget both the income statement and balance sheet. The long-term budget should be updated when the short-range plan is prepared. It should be prepared during the two months preceding the fiscal year-end to allow ample time for sufficient information-gathering. The most effective financial budget includes both a short-range, month-to-month plan for at least a calendar year and a long-range, quarter-to-quarter plan of at least three years that you use for financial statement reporting. Put simply, maintaining a good short- and long-range financial plan enables you to control your cash flow instead of having it control you. Business budgeting is one of the most powerful financial tools available to any small-business owner. ![]()
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