Create a budget

Budgets are essential for tracking the financial health of your business. Your budget is your planned income and spending. It helps you to allocate funds for particular items and activities.

Your budget also helps you to:

• set business goals
• make good business decisions
• get finance.

You need a basic bookkeeping system to keep track of your finances. Throughout the budget period, keep an eye on how you’re tracking against your budget.

Use your budget analysis to help you make business decisions.

If you’re spending too much:

• look for ways to cut costs
• avoid spending money on anything that isn’t essential to running your business.

If you have extra funds, think about:

• ways to reduce debt
• creating a financial safety net
• growing your business.

Tip: analysing your budget will help you find seasonal patterns. You can see if decisions like changing prices or adding a new product or service are the right ones.

Your budget is your planned revenue and spending. It allows you to allocate funds. Consider preparing a budget quarterly or yearly.

Forecasts are usually more frequent, often monthly. A forecast predicts past and current trends in your financial statements. This gives you a more realistic idea of how your business is going and help you to avoid problems.

One of the most important forecasting tools for business is cash flow forecasting. It can also help you keep on top of your bills. It’s useful if you’re trying to get finance – it shows lenders you can pay them back.