As we head into the New Year, it is important to know where you are going and as you move along, if you are hitting your expected targets. This should not be an onerous or time consuming task but it is an important tool to help guide you throughout the year.
Five Simple Tips to Create a Budget
- Think of a budget as a useful tool to help you set goals and measure progress.
- Start with a sales revenue target – make your best estimate.
- Estimate your cost of goods sold (e.g.70% of sales) and subtract from the sales revenue to determine estimated gross margin.
- Forecast your variable expenses (items that vary according to the level of sales) and fixed expenses (items that stay the same regardless of sales). Subtract these expenses from your gross margin to determine net income (before federal taxes).
- Break your annual budget into quarters and monitor your progress every month to detect problems and make corrections.
Advertisement
