Setting and sticking with a budget is important to a successful business. Following a budget ensures you can afford all of your expenses and don’t have to risk going into debt to keep your business running. To build a complete budget, you must know how to set aside finances for each department and understand how each department works together to make up the full-scale plan. A budget should typically cover one year within your department, broken down by each month.
Setting the Budget
List your department expenses, such as supplies or paychecks for those within that division of your business. Depending on the department for which you’re setting the budget, your expenses may also include commercial mortgage or rental payments and other monthly bills, such as electricity.
Look at expenses over the past couple of years to determine any increases in costs that you can assume will occur during the next year. For example, if you’re budgeting for the delivery department and the price of gas has risen in the past two years, then it is safe to assume it will rise in the coming year. Factor these things into your expense list.
Allot room for unexpected expenses, such as delivery truck repairs or a new copy machine when the old one breaks down. An ideal amount to budget for surprise expenses is about 10 percent of your monthly fund usage.
Examine the funds allotted to the department in the past. The chances of obtaining approval for your department budget increase the closer you keep the requested funds to the amount allotted in previous years.
Submit your proposed budget to the appropriate individual or department head. Upon approval, start applying the budget to your department structure.
Compare the actual monthly funds and expenses with the budget approved for your department. Use this comparison to make adjustments to the budget as needed for future months. Again, for example, if the price of gas rises more than expected, then you will need to adjust your budget accordingly by reducing spending in other areas (such as office supplies or employee bonuses if necessary) or by requesting an increase in budget funds.
Typically, any extra funds that you don’t use can count against you on next year’s budget for the department, showing management that you don’t need as much as you asked for and resulting in approval of lower funds next time. Find a way to use all the funds allotted to your department, such as buying a new copy machine.