Creating a budget
Your budget should be in place before the start of the financial year. Most businesses start preparing a budget around 2 to 3 months before this.
You should start by thinking about your:
- the realistic projected sales for the budget period
- direct costs to make the product or supply the serviceo, such as materials, components or subcontractors
- my fixed costs or overheads
You should break down your fixed costs and overheads by type – for example, premises, staff, printing, travel or legal costs.
Salaries and tax
If you're a sole trader, you'll also need to add in how much you need to pay yourself and include an allowance for tax. If you're the director of a business, your pay will normally be included in the salary budget of the company.
You can estimate your Self Assessment tax bill if you're self-employed on the HMRC website.
Your business plan
Your business plan should help in establishing projected sales, cost of sales, fixed costs and overheads, so you should prepare this first.
Once you have figures for income and expenditure, you can work out how much money you're making.
Try to stick to your budget, but review and revise it as needed. Consider using either a rolling budget or periodic reforecasting.