Preparing for the future, especially from a financial standpoint, is critical for all busi-nesses. That's why all businesses need to forecast their revenue and expenses to ensure they remain profitable. The best way for many small business owners to do this is through budget planning.
The goal of budget planning is to lay out all necessary components and brainstorm your goals, here are some steps the budgeting process should include:
Examine vour revenue The first step in any budgeting process is to look backward at vour existing business and find all your revenue (income) sources.
Subtract fixed costs The second step in creating a business budget is to add up all your fixed costs, like rent.
Determine variable costs Variable costs include the price of labor or raw materials.
Set aside a contingency fund for unexpected costs These expenses don't arise only when it's convenient.
Create a profit and loss statement Once you've collected all the above information, it's time to put it all together to create your profit and loss statement, or P&L
Outline your forward-looking business budget Whether you're a new business or you've been doing this a while, projecting what will happen to vour business in the future is educated guesswork.