View Full Version : Does anyone set up Budgets?
02-05-2002, 05:39 PM
I know that I should do budgeting for the upcoming season. I am not sure exactly how to do this.
I will probably talk to an accuontant about it.
What do you guys & gals have to share?
02-05-2002, 06:47 PM
If you have a spreadsheet program, it should be a fairly simple process.
If you have been in business prior to this, start with your financial statements or tax returns (schedule C if you are a sole proprietor).
Set up the categories in rows
Same for expenses (here I would use cash flow, not necessarily expenses, that is probably more important to most of us)
I would also budget in a miscellaneous amount for a "fudge factor" for the items you forgot to include.
Net cash flow
I would do this on a monthly basis, then if you are using accounting software, like Quickbooks, you can print financial reports comparing to budget and see how you are doing.
When you are doing this, be realistic. If you did 4,000 per month last year, what do you really expect to do this year?
The budget exercise will show you what you can expect, but will be almost worthless if you do it and then don't compare actual results to it.
Don't forget, when converting weekly to monthly and vice versa that there are 4.33 weeks per month, not 4.
02-05-2002, 08:05 PM
Bruce has very good suggestions. A couple of additional thoughts.
If you don't have your chart of accounts - you need one. Otherwise you might miss tracking one expense one year compared to the next. Whatever you do, be consistent year in a year out. There was a thread in this forum about chart of accounts.
Once you know the categories, try to look at your old numbers, receipts, statements and determine what you spent before in each category you decide to track. Anticpate new changes for the upcoming year/month or whatever period you're budgeting. Will you buy new equipment? When?
Keep in mind, there are several ways to budget and several things you'll budget for. Budgeting your cash flow is different from budgeting for profit. Sure you're in business to make a profit, but you can still have a negative cash flow and that could make it really tough to pay vendors or employees when the bills come due or when it's Thursday night and you don't have the money to cover payroll.
What ever your plan... or road map is - make sure you check it regularly. Don't budget and stick it in the drawer and ask yourself at the end of the year... how'd I do? You've got to look at it every week, or once a month. It will force you to think realistically about your revenue and expenses on a regular basis.
Lastly, to determine your revenue, consider a few things. Make an Operational Budget. You can look at how much you did last year in revenue and where did those sales come from? Assume you want to increase sales by 10% or whatever is right for you. In what areas will you do this? Will this be in lawn care applications only? Will this come from installations?
Ask yourself, compared to the number of hours worked last year, how many more man hours (or laborers) will I need to increase my sales in the specific areas by 10%? What equipment will I need? Do I have it? No... then budget to buy it. Be sure to include then in your P&L Budget an increase in labor, advertising, etc. Your sales will often drive your expenses, so you can anticipate your expenses based on what you think your revenue will be and from what areas of your business. Your operational budget will affect your Profit and Loss Budget and your Cash Flow Budget. They are all intertwined.
Good luck with it. Don't get discouraged.
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