While businesses can have many goals, one of them is always going to be making money. Even businesses with the noblest social goals still need to ensure their financial survival. This is why it’s important that your business has robust budgeting and accounting practices.
What is a business budget?
A business budget is a dynamic plan that can be used to estimate a business’s turnover, expenses and profit over different time periods. It needs to be dynamic so that changes can be made in light of market conditions or changes in a business plan.
This budget should be in dialogue with the business plan itself, with both affecting the other. For example, you may have an excellent idea for a new income stream, but you may need to reallocate funds in your budget in order to get it off the ground. In turn, that may mean you expect a higher return, so you may have more money to reinvest later on, all of which should be reflected in the budget.
It can be useful to get a business budget template to ensure you are considering necessary income and expenses. There may be unexpected fees or costs that you do not anticipate as a young business. You can also make use of business budgeting software to simplify this process.
Operating and financial budgets
There are many different types of budgets in business but the key two to know are the operating budget and the financial budget. The operating budget deals with a comprehensive estimate of an organisation’s revenue and expenses over a period of time, while a financial budget deals with things like cash flow, assets, expenses and income.
The combination of both these types of business budgets offers a comprehensive view of a business’s financial health.
For more information about budgeting, check out our blog on small business cash flow.
