Plan your business budget in 5 simple steps


It is essential to chalk down a realistic budget for your business for it to function smoothly. A well-planned yearly budget is the best tool to forecast the business turnover and it also equips you for unpredictable business emergencies. It helps you set yearly targets while organizing sales, purchase and capital more efficiently. Here are a few steps to help you plan your budget better in order to optimize the usage of your existing resources.

1. List your revenue streams: The first and most important step in planning your business strategy and budget is to figure out how much money your business makes on a monthly basis. Start with your sales by jotting down a profit and loss report. Then add other revenue sources like investment returns, and revenue received from infrastructure rental, if any. This helps in planning business operations like inventory purchase, employee salaries disbursal; and office expenses like rentals, utility bills and vendor payments. If you have more revenue rolling in than your expenses, then you are making profits. If your expenditure is more than your profits, then your business is making a loss.
Some ways you can fix this:

  • Re-structure your investment strategy.
  • Pay debts in time to avoid heavy penalties.
  • Maintain financial liquidity, so you are fully equipped to run your business. If unable to do so, you could also go for a collateral-free SME Loan

2. Forecast expected expenses: Besides evaluating your business cash flow, it is also important to write down the fixed monthly expenses that your business would bear. You could review your bank statements to identify your regular bills and the money they cost every month. It could also include workplace maintenance expenses like re-furbishing, AC maintenance, and lighting fixtures. Money needed for promotions and events should also be added to the budget. 

3. Add Variable Costs: There are many expenses that are not fixed and these could be adjusted according to a company’s financial health. You could increase the funds for the same to expand your business faster, when the business does better than your expectation. However, the dynamics of the SME segment requires entrepreneurs to grab every growth opportunity without wasting time. It’s always a good idea to approach other sources of business funding like fintech companies that offer quick unsecured SME business loans in India, instead of relying on business profit.

4.Cash liquidity management: To run an SME smoothly, it is important to have consistent cash flow. It can be done by striking a balance between investments and cash reserves in business accounts for monthly expenditure. 

5. Review your budget plan:  Budget planning works well with SMEs when they are diligently followed. Often, these budget plans fail because budget sheets are just pinned to a board or are lying in a drawer. Budget plans need to be reviewed and revised every month to keep the objectives and targets in mind while performing the business operations.

These budget strategies will help you organize your finances, manage cash flow and foresee the growth of your business.

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