Chapter 2 – Financial Control – Rule your money
This is part of the ‘How to’ coaching series. An ongoing series of activities to make your business successful. Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.
Activity 26 – I have a Profit and Loss Budget for my business.
Do you know, month on month, what the expectations are for your business?
The P&L budget, usually created for the year, or years, ahead, is the forecast of how you expect your business to perform financially. It is a forecast of the planned income and expenses over time.
The idea of the budget is to help you understand the effort and resources that will be required to deliver the predicted income, supported by the predicted outgoings. Over time these budgets should be easier to get right. Based on the results previous years, where you review actuals against targets, you can hone the forecasts to give a more accurate view of the future of your business.
If you want to get finance, this is one of the first things a lender/investor will be looking to. If you are looking to sell your business, a buyer wants to see the last 3 years of your management accounts showing a track record of how your predictions matched reality.
The ‘How to’ bit:
Many of the financial tools will give you this facility, or you could use a simple spreadsheet. I have one to share if you would like a copy.
Enter your income goals/targets for the year on a monthly basis and then the anticipated outgoings over the year, month by month.
Remember to add in any expenses associated with sales (Cost of goods sold). This could be for materials for a product or costs for delivering your services.
Use any previous years’ financial ‘factual’ information to help you understand what your P&L can be. Keep it realistic.
If you would like help setting up your P&L budget, follow this link and Contact Us…