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Budgeting Guide for Startups


February 7th, 2023 11:13

"A budget tells your money where to go instead of wondering where it went."


What is a Startup budget, and how Can it Help?

Running a successful startup requires having a budget. It's important to know where your money is going and how it will be put to use. You may prepare for the future and make the best financial decisions using a business budget model. 

Additionally, it will assist you in establishing realistic goals and ensuring that you are adhering to your budget. Startups must ensure that their funds are appropriately managed and continue to develop and prosper by using various budgeting techniques.

Why You Need a Budget for Your Startup?

1. You will make sound financial decisions for your business and allocate your money in the most efficient way.

2. Your hiring will be better.

3. You will be equipped to handle any unforeseen contingencies. 

4. You will make your startup an asset for landing hefty investments as you will have accurate financial statements to back your claims.

5. You can scale your business and avoid fundraising in the early stages.

6. You can estimate your break-even point.

7. You can identify extra cash and predict any shortfalls that may come.

Creating a Budget Plan and Sticking to it- 4 Easy Steps

Choose a Tool

Gone are the days of manual budgeting for businesses. Today, all companies use online tools like excel sheets or specialized applications to keep their finances up to date. Some of the tools to choose from are

1. Scoro- Allows you to forecast your spending and gives financial reports and analysis.

2. Centage- A comprehensive tool with all necessary features

3. Planguru- If you are looking for more straightforward software, try this Planguru 

4. Maxiplan- not only allows you to make a budget but also advises on how you can make it cost-effective

5. Coupa- gives you a real-time budget tracking facility 

List the Essential Cost Categories to Include in Your Startup Budget

Typically, the fundamental startup costs are one-time expenditures necessary to launch your firm. Depending on the type of business you are establishing, actual expenses might vary substantially; for most startups, they may comprise a combination of the following prices:

1. Costs for Registering a Business, Business Insurance, Bank Fees etc.

2. Equipment and Other Utilities

3. Computers and Website Maintenance

4. Stocks or Raw materials

5‍. Intellectual Property like Logo, Trademarks and Patent 

6. Payroll and Benefits for Employees

7. Rent, Lease, and Mortgage

8. Business Loans and Interest Payment

9. Professional and Consultancy fees such as accountant, marketing and legal

10. Daily Maintenance of Office Space and Administrative Costs

List Your Sources of Revenue and Make an Estimate

Any business draws revenues from three significant sources: sales, investments, and savings. It's best to create at least two sets of revenue predictions, one optimistic and one conservative, given the absence of prior sales data for your company.

Tally and Review your Expenses

The last step is to review your monthly expense projections and determine how much money you'll need to start. Go back and categorize each expense as necessary (must-haves) or optional (nice-to-haves). Choose which expenses you can go without, cut back on, or put off, starting with the discretionary ones.

Additional Tips to Ensure A Smoothly Working Budget

1. Make Room for Contingencies

2. Keep the Budget Flexible

3. Give Priority to Expenses

4. Don't Make it too Complicated

5. Check and Review your Budget Periodically

6. Consider making multiple budget drafts with varying considerations and eliminate issues and errors.

7. Keep in mind your future investment and fundraising plans

8. Set aside cash for paying taxes

9. Keep all your Receipts

10. Consider freelancers and independent contractors 

Conclusion: Start Planning and Monitoring Your Startup Budget Today!

The first line of defence for a small startup is an optimal budget. It's a flexible plan of action that enables you to adjust to developments and foresee cash shortages. Additionally, you already have an advantage over two-thirds of the competition if you make an effort to create a well-defined budget and employ financial computational methods.

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