A budget is an essential financial statement. It shows you how to direct your money to where it's most needed. Use our template to help create a budget for your business.
The importance of a budget for your business
Budgets help track the financial health of your business. This is your planned income and spending. It allows you to manage funds for activities and items for your business.
Your budget also helps you to:
- get finance
- make good business decisions
- set business goals
Monitor your budget
A basic bookkeeping system can help keep track of your finances. Throughout the budget period, monitor how you're tracking against your budget.
Use your budget
To make better business decisions, use your budget analysis.
If you're spending too much:
- look for ways to cut costs
- save money on things that are optional to running your business.
If you have extra funds, think about the following:
- Creating financial safety nets
- Growing your business.
- Ways to reduce debt
Tip: analysing your budget helps you look for seasonal and spending patterns. You can determine if your financial decisions are correct.
Understand budgeting versus forecasting.
A budget is planned revenue and spending. It allows you to allocate funds. Consider preparing a quarterly or yearly budget.
Forecasts are usually frequent, often monthly. They also predict past and current trends in financial statements. This gives a more realistic idea of how your business is going and helps prevent financial issues.
Cash flow forecasting is helpful in business. It also helps you keep on top of your bills and other expenses. It's helpful if you're looking for finance – it shows potential lenders you can repay them.
