Step 1. Use a budget spreadsheet you are familiar with or contact MJJ Accounting & Business Solutions for our free template
Step 2. Update the fields in the template (income and expense rows) so they reflect the income and expense categories that are relevant to your business. You can copy the ‘Chart of Accounts’ in your existing accounting system.
Step 3. Extract a month by month profit and loss for the last financial year from your business financial records and feed these numbers into your budget template, so that July 2014 actuals become July 2015 budget etc.
Step 4. Identify and update your fixed costs where you know they will be different from the previous year. Fixed costs are those that don’t vary and include rent, insurance, electricity bills, lease commitments etc. These costs should be fairly easy to project and remain constant.
Step 5. Update your revenue figures for projected increases in volume and/or price increases. Remember to have a clear basis for predicted increases in revenue, these should be supported by an increase in customer leads, conversion rate, number of customer transactions and average spend.
Step 6. Update your cost of sales proportionately for the increased revenue target. You can use your historic gross profit margin to determine the approximate increase in cost of sales to produce the increase in additional revenue. The direct costs may include raw materials, goods purchased or productive staff wages.
Step 7. Add any planned major expenditure such as the purchase of machinery, vehicles or equipment. Consider also the sale of existing assets to your budget.
Step 8. Finally, review the budget line by line for completeness and make any changes where necessary. When completing this process think about any changes in trading for the next 12 months such as large repairs to be completed, new advertising and marketing campaigns, the use of consultants throughout the year, plans for business travel etc.