Starting a Business No 7 - Financial Strategy - No 1 Budget Forecasting

A budget forecast has several purposes. It can be used, for example, to obtain the following:

• an estimate or preview of the likely profit (loss) from one of your projects, eg a gig;
• an estimate of the yearly profit (loss) from your trading enterprise, eg as a retail outlet.

Thus budgetary control is an important aspect of running your business. Prior to the beginning of given period, eg a year, you  make estimates of items of income flows and expenditure flows within shorter regular periods, eg months. 

For the year the difference between income and expendityure is your profit.

You will need to portray the year as a table of 14 columns. The first column shows the names of  incomes and then expenditures, ie in successive rows. The next 12 columns are for the months with another column showing in successive amounts of the income and costs for  type of income and expenditure. The final column shows totals for each row. The last row at the foot of the table shows the totals for the columns.

A comparison of the sum of the totals of the final column and the sum of the totals of the bottom row should be the same. If not you will need to do some checking! The final correct result is your estimated profit (or loss).

For a shopkeeper the income flow will usually comprise sales (turnover), The expenditure will usually include: a) purchases of stock, b) wages and national insurance, c) heating and lighting; d) rent, and e) local taxes.