HomeHome SearchSearch MenuMenu Our productsOur products

Don't make a financial loss this year! Include these seven elements in your 2015 operations budget

by , 09 January 2015
To run your business successfully, you need to manage all your operating expenses. (Essentially these are the costs of carrying on business on a day-to-day basis.)

To manage these, you need an operating budget.

But to be accurate and effective you need to make sure your operating budget contains all the right information. Otherwise, it won't help you at all.

That's why you must include these seven elements in your operating budget...

Make sure these seven elements are in your operating budget

1. Sales
Study your company's peak and low seasons to forecast what your sales will be. If you don't, you'll under-budget and won't be able to cover costs. Also identify any items that aren't likely to recur, like special sales, accidents, etc.
 
It's important to forecast sales using your previous year's figures. If you're starting a new business, use industry insiders to give you a framework for the sales you'll achieve.

2. Cost of sales
Forecast the cost of sales by using the previous year's figures. This forecast depends on your industry.
 
*********** Advertisement ************
 
See how perfectly you can be in control of all your company's operations

We have professional experts that make it easier than ever for you to create all the necessary budgets you need to have in place.

The Master Budget Series is the toolkit for anyone who works with budgets. Thanks to:
 
  • 10 budget templates you can customise for your business;
  • 10 different types of budgets and how to create each; and
  • How all 10 budgets interlink and work together with the final guidance of experts with years of experience and practical examples, the preparation of a budgeted income statement is now much easier!
 
***********************************
 
3. Gross profit
This is the total amount you expect to bring in from your total sales before you deduct anything.

4. Variable costs
Make sure you budget enough for variable expenses such as labour and material. Calculate if you'll need to hire more workers this year or if you'll need to increase stock.
 
Use the figures in your direct material budget, direct labour budget and sales expense budget. These budgets will show you where you can save money on these costs. They'll also help you calculate the cost per unit.

5. Fixed costs
Fixed costs are regular costs that don't vary with output, such as your rent. Your general and administrative budget shows how you could save money on these particular costs. It also helps you calculate the cost per unit.
 
If you use your previous year's figures as a reference, your current fixed costs will increase because of inflation.

6. Net profit/loss
Determine your profit/loss for the next 12 months by deducting the cost of sales, variable costs and fixed costs from your total projected sales.

7. Payment and income
You need information about when payments and income actually come in for your cash flow budget, not just how much you can expect.
 
When you draw up these elements, you must use your supporting documents. This bases your operating budget on past experiences and will help you create a realistic budget.
 
If investors ever ask for reasons for your operating budget, you can also show them your source documents to explain why you budget the way you do by showing them the patterns and trends you experienced in the past.
 
And remember, your budgeting job isn't finished once you include these seven elements.
 
There's one other thing you have to do after you create your operating budget
 
According to the Master Budget Series, once you create your budget, you must go back and reassess your forecasting. After all, if the budget comes out as a possible loss, you need to change your forecasting to ensure that doesn't happen.
 
You must constantly reassess your forecasts and budget to make sure they're accurate.
 
You can find a template for your operating budget, as well as nine other budget templates, in the Master Budget Series.
 


Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>