Creating a budget
Your budget should be in place before the start of the financial year - most businesses start preparing a budget around two to three months beforehand.
Start by asking yourself 'what are':
- the realistic projected sales for the budget period?
- the direct costs of sales, such as costs of materials, components or subcontractors, to make the product or supply the service?
- my fixed costs or overheads?
Break down your fixed costs and overheads by type – for example, premises, staff, printing, travel or legal costs. You also need to add in how much you need to pay yourself, and include an allowance for tax.
You can estimate your Self Assessment tax bill if you're self-employed on the HMRC website.
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.