How To Create A Realistic Budget

Happy Goal Setting week! I know we are all geared up with power SMART goals and objectives for 2018.

One important aspect of our goal setting objectives is a financial plan. Whether we are doing it for our homes, our business or for personal use, we need to get (and stay) ahead of the numbers.

Speaking of budgeting, here is a rundown of how to create a realistic, feasible and achievable budget for your business/Start-Up– Let’s call it a SMART budget.

1 - Look through your records

This is very important and for me the best way to create a realistic budget. Gather all your financial statements or sales and expense records and look through them to discover the trend in your sales and expenses. I’ll suggest you look at the records for 6 - 12 months.

2 - Create a Revenue Budget

Create a sales target for the period you are budgeting for. Take note of trends identified in number 1 and create a plan that can be achieved. For instance, we can identify the slow months - known as downtime in certain industries and use this information while creating a sales budget to plan cash flow accordingly.

3 - Estimate your cost of sales

This depends on the nature of your business. Estimate the costs that have to be incurred in order for you to achieve your projected sales. For instance, estimate cost of fabric, labour and accessories that will be incurred in order to make the number of dresses projected for the period in a fashion business. Don’t forget the small things like delivery costs and others that can be allocated to each product/service.

4 - Estimate your expenses

Start this by creating a list of fixed expenses which you have no control over (for example, salaries, rent etc). Estimate expenses that can be controlled and adjust them in a way that is feasible. Note, make sure your estimated expenses are in sync with your planned income.

5 - Estimate your profit

Deduct your estimated cost of sales from your projected sales and get your gross profit, deduct your expenses from the gross profit to get your net profit. If you are not satisfied with your profits go over your sales and expenses then devise strategy to increase sales and reduce expenditure where possible.

Have a crack at creating a budget for your business this 2018, not only will it give you direction, it also increases your chances of achieving your financial goals.

Lets Get Started!!

P.S. If you got stumped at number 1, 2018 is a good year for you to start keeping detailed records of sales and expenses to use for future years. You can create your budget off realistic projections of sales and market costs of your raw materials and your other expenses.

Tejumade Adekola

Trainee Coach

Big Startup

Tejumade is a highly motivated Statistician who is currently studying to become a Chartered Accountant from the Association of Chartered Certified Accountants (ACCA).

She is the founder of The Tejumade Girl - A platform that helps young women focus on building their future, ditch distractions or limitations and wear their crowns. She is very passionate about SME’s and has a wealth of experience in the fashion industry where she has used her analytical and finance skills to help businesses. She is very passionate about the youth and believes she has a mandate to help them become the best of themselves and discover that they are the future of Nigeria.

Tejumade is an integral part of the Big Startup team and is training to become a certified business coach. She is an enthusiastic go-getter, enjoys having educative conversation and derives pleasure in creating things.