How do you develop a business budget My boss wants me to use last years expenditures and figure out the budget for 2008. How do I do this?

Answer 1

Pretty complex question for a short answer.

Basically you take all of your expenditures from the last year or quarter or whatever period of time you are using, and adjust them using extrapolation (educated gueswork) for the upcoming like period. All things being equal, expenses and income tend to rise at a given rate over a period of time.

I.E. If your income and expenses have increased at an average of 10% a year for the last several years, then that is most likely what will happen in the future.

However, there are exceptions. If there are abnormal changes in the past year, or planned changes coming up, those need to be accounted for. Some examples could be: local and national economic conditions.

I.E. A major local emloyer has closed. A large influx of people, or business has caused an increase in lease prices, or vice versa. Increase or decrease in customer base.

I.E. if the number of clients you service has doubled in the last year, you will have more income, and more expense associated with that. Increase or decrease in cost of basic necesseties for business.

I.E. if you make deliveries, and the cost of gasoline goes up by 50%, then there will be an increase in projected fuel expense. Employees.

Do you need to hire people, training costs money, in addition to the extra wage costs. Are you planning to launch any new items/services there may be extra marketing or advertising expenses. You know your business better than me, remember these are merely figures to determine if your company is out of whack somewhere, or doing very well. The better your guesswork, the better you can figure out what your expenses will be. These numbers will help determine if you need to make changes in pricing, employees, marketing, and methods of doing business for the upcoming year. If you are using software for your accounting, there is usually something built in for budgeting purposes. If not, try using excel and search for a template and adjust it for your needs. Otherwise you can do it old school with a ten key calculator and a typwriter. I'm assuming some accounting knowlege considering you were asked to do it. If not use last year's budget, and adjust the numbers for this year's expenses, then type it up. Without knowing what your business is, and where you are located, that is about all the good i can do for you. Best of luck,

Matt