”Failing to plan is planning to fail” – Benjamin Franklin
”Failing to plan is planning to fail” – Benjamin Franklin
Process Steet’s Budget Process is to be used as a guide for you, as a small business owner, to budget your business and plan for your business’s financial future.
Process Street has condensed the procedure of budgeting into the below steps:
Budgeting as a procedure can date back as early as 1760, in England, as the Chancellor of the Exchequer presented the national budget to parliament at the beginning of each fiscal year.
Budgeting in a business sense, as opposed to a parliamentary sense, came into its prime postwar during the extensive application of business management procedures.
Budgeting in business is seen as a prerequisite for success. Budgets allow a business to monitor financial situation and performance, enabling both the control and planning of business finances.
Despite its clear importance, 61% of small businesses did not create an official, formally documented budget in 2018. Smaller businesses are more vulnerable to becoming insolvent, yet the smaller the business the less likely they were found to produce a budget plan.
With this neglect to creating an official budget comes the risk of surprise expenses and insolvency.
The aim of Process Steet’s Budget Process is to break down the budgeting procedure to guide the production of a quick, efficient and accurate budget plan for your business.
In this template, you will be presented with specialized questions given as a form field. Different form fields are used, such as subtasks, dropdown menus, short answers, long answers, and weblinks.
You can populate each form field with your own specific data. This data is compiled to produce a report where appropriate.
In addition, our stop task feature has been used to enforce task order when needed. Our conditional logic task has been used as required to guide you through the correct process path specific for your entered data.
In this Budget Process, you will be presented with the following form fields, which you are required to populate with your own specific data. More information is provided for each form field via linkage to our help pages:
To begin the Budget Process, enter the required details into the form fields below.
This is a stop task, you cannot move forward in the Budget Process until the required checklist details have been entered.
The first step of Process Steet’s budgeting process is to look backward at your existing business. You need to determine where your money is coming from, and how much revenue you are receiving.
Check off the tasks below on completion.
You can consult your Profit and Loss statement to obtain the above information.
It is important you consider your revenue only and not your profit. Revenue is the income generated from the sale of your goods and services before costs and expenses have been deducted. Profit is the difference between the amount earned and the amount spend.
Once you have identified your revenue sources and summed the revenue amounts, you can calculate your monthly revenue income.
Once you have calculated your monthly revenue, you can identify patterns such as seasonal differences, or differences due to given events.
Creating a graph is the best way to visualize your data and clarify data trends.
Once you have created this graph, you can upload the graph below using our file upload widget.
When listing the important trends in your monthly revenue data, it is important to identify the most profitable months and the least profitable months.
You can use your more profitable months to prepare for the leaner months in advance.
Once you have identified which months will be more profitable, you can create an action plan to mitigate against the leaner months.
Use our file upload widget below to upload a copy of this action plan.
The second step to creating your budget is to sum your fixed costs for each operational month. Fixed costs might occur daily, monthly, or annually. Make sure all fixed costs are considered.
Consider the below suggested fixed costs, and add up the total to obtain a total fixed cost expense for each operational month.
Every business is different, it is important to consider fixed costs specific to your business in your budget plan. Take the time to consider fixed costs not already mentioned in the above.
A fixed cost is defined as a non-changing expense regardless of increased or decreased operating output.
Before moving on to the next step, you must subtract the total of your fixed costs expenses from your total revenue for each operational month.
This is a stop task. You cannot move on to the next step in the Budget Process until this step has been completed.
The third step of Process Steet’s Budget Process is to sum your variable costs for each operational month. Make sure all variable costs are considered.
Consider the below suggested variable costs, and sum these variable costs to obtain a single figure for your variable costs expenses for each operational month.
Every business is different, it is important to consider variable costs specific to your business in your budget plan. Take the time to consider variable costs not already mentioned in the above.
Variable expenses, also known as variable costs, are expenses that change depending on the products or services output.
During leaner months you will need to lower your businesses variable expenses. To do this, you can target your discretionary expenses.
Identify and make a list of your discretionary expenses to target.
During the more profitable months, you can increase the spending of variable expenses for the long-term benefit of your business.
Discretionary expenses are variable costs that your business can function without but provide a service or product to your business tha is useful to have.
When running a business, it is inevitable an unexpected one-time cost will arrive. It is important to set aside a contingency fund for these unexpected costs in your budget plan.
The below dropdown form field represents a conditional logic step in this Budget Process. Selecting ‘Yes’ or ‘No’ from this form field will direct you to the relevant steps in this template.
Your most profitable months as previously outlined
If you do not believe your emergency fund is adequate enough, consult your discretionary expenses and most profitable months once more to see if you can identify other areas to draw out additional income for this fund.
If you still do not consider your emergency fund as being of an adequate amount, you can obtain a loan.
A profit and loss statement is a vital financial report allowing assessment of your business revenues, costs, and expenses for the time period considered.
Consider the months you have been operational which should be the months considered in the previous tasks. Create a profit and loss statement for this time period.
The profit and loss statement brings together the information you have already considered in the above. A profit and loss statement is little more than subtracting the already identified expenses from your revenue.
If you have a negative total at the end of your profit and loss statement, this means you have made a loss. A positive total infers a profit. As a small business, it is not unusual to make a loss in the first starting months.
A businesses profitability will vary from month to month and from year to year.
You have looked at the historical data relevant to your business, it is time to do some forward thinking, which involved a lot of educated guesswork.
Information obtained from looking at your historical data has been summarised below.
You can use our file upload widget to upload a copy of your profit and loss statement.
Using your profit and loss statement and the above, confirm the following have been considered:
Using Process Street‘s Financial Planning Process and Process Street‘s Financial Plan Template you will be able to make financial projections into the future by building a financial model and forecasting financial parameters such as net income, revenue, and gross margin.
You can consult these projections in your budget plan, to make sure your budget plan is forward-thinking.
In your budget, you can consult this financial plan to obtain an idea in regards to our cost and revenues
Once you have completed your budget plan, taking into account your current financial situation and your projected financial situation, you can upload this plan below using our file widget.
Once you have created your budget plan, you will need to continually assess your fixed and variables costs and your revenue to see how these compare to those accounted for in your budget.
You can update your budget in light of this information.
There are ways to make your budgeting process more efficient, which have been suggested below. Check off each subtask on its completion.