Creating a budget manual to obtain financing for your business

To obtain financing for your small business lenders and investors are going to want to look at your budget manual. The reason for this is that your budget manual is going to give your investors ideas about what kind of budget you will be working with, how much money you plan on making, how you plan on paying your expenses, and how you plan on expanding your business. Your budget manual is the rules that you will be following to create your budget.

Step one:
You will need to decide who is going to be participating in planning the company's budget process. If you are a sole owner then only you will be planning the budget, if you have a partnership then there will be two of you planning the budget, etc. If you have more than one department then you will want to include the department heads from every department to join in the budget process, after all they know better than anybody what kind of budget they are going to need.

Step two:
Review program and management achievements and fiscal performance for the year that has just ended. When doing this you should compare your budget from last year to your actual figures to see how close you came to following your budget and to see if any changes are necessary. You also need to review your objectives and goals from the previous year to see if they were all meet or if not, why they were not meet. After reviewing your prior year's goals and objectives you should start discussing what your new goals and objectives for the upcoming year are.

Step three:
You will need to estimate what your new costs are going to be in order to reach your new goals and objectives. When you are estimating your costs, you need to take in both fixed costs and variable costs. Sometimes fixed costs are overlooked in the budget process because regardless of what is going on we still have to pay those costs. Although our fixed costs are not tied to our current goals or objectives, such as building our customer base, they still need to be accounted for because they are an integral part of running the business. Each cost should be listed separately. For example, wages should have its own line item; raw materials should be on a separate line, etc.

Step four:
You will also need to estimate your income for the year. You can do this by comparing the last few years' income to get a general idea. If one of your goals is to increase your sales, you should add in some extra income but always estimate on the conservative side.

Step five:
You need to compare your expenses and income that you have budgeted. Not all budgets have to balance but you must understand why they do not balance. For example, do you plan to purchase a major asset this year to help increase your business over the next year or two? If so you might be running on a deficit this year, but once your sales increase you will no longer be running on a deficit.

To help make an accurate [prediction of your business income you will need to ask yourself some basic questions about your business. You will need to figure out how much you can realistically sell next year and how much you will charge for your products or services. To figure out how much you will charge for your products or services you need to know how much the product costs to make, plus how much your time is worth. You add the two together and then mark it up for your final selling cost. How much you sell the product or service for is going to figure in to how much money you will make for the year.