A budget is a plan that outlines expected income and expenses for a specific period, helping you manage your money. It's a way to track where your money is coming from and going, ensuring you have enough to cover your needs and potentially save for your goals.
Creating a budget allows you to plan for how much money your business plans to make from various sources, as well as how and where your business will spend money. If you haven’t started your business yet, you can create a preliminary budget by creating a business plan.
The most common business expenses include:
- Payroll
- Employee benefits
- Wages paid to contractors
- Utilities
- Rent or mortgage payments
- Insurance
- Bank fees and interest
- Software and technology
- Supplies
- Raw materials
- Taxes
- Maintenance and repairs
- Marketing and advertising costs
- Depreciation and amortization
- Transportation and travel costs
- Training and development costs
- Equipment and machinery
- Legal and professional fees
Startup costs (business registration, market research, product development, permits, licenses, trademarks, patents, professional services, etc.) When you create your budget, it may help to categorize expenditures as “essential,” “important,” and “optional.” If money is tight, this can help you quickly decide where your business needs to cut back. It’s also helpful to separate your expenses into one-time costs, recurring monthly costs, and annual costs. This will help you better understand when you’ll need cash to pay each expense. It also helps you understand which costs are fixed and which are variable.
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