How To Organize Your Budget When Starting A New Business

Starting a new business is no joke – there are so many processes and things to get done, and this can all be overwhelming for the new business owner. But, perhaps, one of the most important tasks for any new business owner is how to organize a budget for the new company. This can be especially challenging since there is no existing information to use as a standard for determining the expected income and expenses.

Even more challenging is the fact that organizing a budget is no easy task. This is one of the tasks that most new business owners struggle to figure out. It’s no surprise since organizing your budget requires a good knowledge of how to draw up estimates based on different variables in your business, as well as some budget organization skills that new business owners may not have.

If you are having a hard time organizing your budget as a new business owner, this article will walk you through what you need to do. Alright, let’s get into it; 

Step #1: Determine Your “Day One” Startup Budget

The most important step to organizing your budget when starting a new business is to figure out your “day one” startup budget. This typically covers how much you’ll need for your business to run for the first day. 

The day one start-up budget can typically be segmented into four categories, although all these categories may not apply to your business. These are:

• Materials and supplies
• Fixed assets or capital expenditures
• Facilities costs
• Miscellaneous 

You should determine the cost of every item within these four categories as these will help you get credit for them as collateral if you need a business loan. If you need a business loan to fund your day one startup budget, it is best to get one from a licensed moneylender in Singapore because this is the best option, especially if you are having a hard time getting funds to operate your “day one”. 

Step #2: Calculate Your Monthly Fixed And Variable Costs

After determining your day one startup budget, the next step is to draw up an estimate of your monthly fixed and variable costs. Your fixed costs are expenses that don’t change and aren’t determined by the number of customers or sales made. These could include utility bills, website service fees, rent, business insurance, business loan payments, etc. On the other hand, your variable costs are expenses that change based on the number of customers or sales made every month. These might include costs for raw materials, production costs, packaging and shipping costs, shipping costs, etc. When you have an estimate of your monthly fixed and variable costs, organizing your budget will be a piece of cake. 

Step #3: Determine Your Monthly Sales

Okay, this is probably the part that’ll need extra work because estimating your monthly sales can be quite challenging. This will typically be determined by the type of business you are running and how many customers you get per month. The best option is to estimate within a feasible range, as this will prevent you from overestimating or underestimating your monthly sales. You might also consider estimating your break-even point and including this in your budget. The break-even point shows when you will start making a profit on each sale. 

Step #4: Plan A Cash Flow Statement

Managing your cash flow is one of the most important aspects of organizing your budget. Your cash flow is all of the money going into and out of your business every month. As a new business, your cash flow is much more important than profits. To plan your cash flow statement, you need to add the total costs as well as total collections of money made from all sales per month. 

A typical monthly cash flow totals look like this:

• Monthly sales $60,000
• Collected $52,600
• Total fixed costs $36,800
• Total variable costs $14,800
• Total cash balance $3,300

Your total cash balance ($3,300) is not your profit. From your cash balance, it’ll be a lot easier to figure out if you will need to borrow funds for working capital.

No doubt, organizing your budget, especially if you are new to it can be a herculean task. It’s quite normal if you don’t have it all figured out at the first attempt. With the help of this guide, you should have a pretty decent idea of where to start from. You can also opt for good accounting software, as these are designed to help you easily organize your budget without the need to acquire any extensive budget organization skills or knowledge.