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How To Set Up A Master Budget For Your Small Business

As an individual, setting up a budget for yourself and sticking to it can be crucial to building up your wealth and planning for your future. It is just as important, if not more so, that you do this for your company. Your small business needs a master budget, and who better to form it than the owner? Follow these steps to creating your own budget today.

Use Previous Budgets As A Baseline
If you have ever made a budget, use it to establish a baseline for this one. When you have something to go by, it gives you an idea of costs for each area. For example, you may have costs for utility bills, for manufacturing, for employee bonuses, and other costs that you may only know about if you have had a budget in the past. If you have not had a budget in the past, research the sector that your small business fits into. How much do other companies make that are in your sector? Can you identify their costs?

Identify Fixed Versus Variable Costs
Then add up your expenditures for the year. Your costs will show you how much you need to make to stay afloat. There are fixed and variable costs that you need to separate from each other, so that you know which to change and which to work with and mold. Fixed costs can become variable over time; so do not be afraid to label them as fixed. For example, salaries may be fixed this year, but they may change as you get new employees. Manufacturing costs, however, may change, as you make less or more of certain products with market demand.
Do you spend a variable amount on bonuses or other employee incentives? Perhaps you should figure out a good fixed cost for this area, over the next year of developing and implementing your master budget. This can free up money that can be used for manufacturing and investing. It is always good to know where your money will be coming from and going. When you spend with your head rather than your heart, you come out more organized and efficient.

Finishing Your Budget
Now that you have added up your fixed and variable costs and have on paper how much you spend each year, figure out the difference between this and your income. If you make more than you spend, including what you pay yourself, you are doing well. If you do not, but you are in the first few years of growing your business, do not fret. These years typically look this way for start-up companies. As you pay back loans and use your revenue to pour into investment for capital, you will make more over time.

This list of expenditures and costs is not really a budget until you do something with it. Figure out how you can reallocate money to the most important areas or cut down in others to make it work better for you. Be flexible, and allow yourself room to grow throughout the years. But always keep track from now on of your expenses so that you know where you stand. Just remember the following:

For Bank Loans
- You can only take out loans if you show that you are profitable or that you take good care of your money. A budget helps with these things.
To Close The Cash Flow Gaps
- A budget will show who is not paying for goods as quickly as they should so that you can mend this.
To Get Ahead
- With a budget you can plan for the future of capital, and figure out how to spend revenue.

These steps will help you to make a master budget for your small business.

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