January 6, 2008
101 Budgeting
It's a new year, and if you're a small business owner, you may have been too busy to sit down and seriously budget for 2008. Here are five tips from SCORE (Service Corps of Retired Executives) on how to get your financial house in order in the new year.
1 - Think of a budget as a useful tool - a written financial plan that helps you set goals and measure progress.
1 - Think of a budget as a useful tool - a written financial plan that helps you set goals and measure progress.
2 - Start by coming up with a sales revenue target. Make it your best estimate.
3 - Based on past experience, estimate your cost of goods sold (e.g., 70 percent of sales) and subtract it from the sales revenue to come up with your estimated gross margin.
4 - Forecast variable expenses and fixed expenses. Subtract these expenses from your gross margin to arrive at your estimated net income (before federal taxes).
5 - Break your annual budget into quarters and monitor your progress every three months to detect problems and make corrections.
Source: SCORE, www.score.org.
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