2. Objectives To understand the importance of budgeting.
To identify the parts of a budget.
To describe the process of creating a budget.
To create and implement a budget.

3. Budgeting
Is the allocation of monetary funds based on a determined structure

4. Budgets
Are the blueprints for execution and organization of revenues and expenditures
Are specific plans for how you spend and save money
Are numerical records which show expected results for a specific time period
Are used as a planning guide and control device

5. Reasons for Budgeting Provide company or personal financial stability
Generate a map of financial practices
Guide efficient business decisions
Establish a profit or projected goal
Control expenses, debt or liabilities
Prepare for emergencies and savings

6. Reasons for Budgeting Helps monitor the following:
assets and liabilities
investments
savings and expenditures
profit and growth

7. Additional Benefits of Budgeting
Improve credit scores
Lower fees or interest rates
Financial stability or enhanced wealth
Prevent impulse or unneeded purchases

8. Basic Parts of a Budget Income (accounts receivable)
sales
investments
Expenses (accounts payable)
fixed
variable

9. Gross Income
Is the amount of income received before costs of goods and taxes
Is also known as “pre-tax” income

10. Net Income
Is the amount of income after costs of goods and taxes are deducted
Is also known as “after-tax” income

11. Creating a Budget Track spending Gather financial records
List monthly income
List monthly expenses
Balance the budget

12. 1. Track Spending Keep receipts for all purchases and expenditures
Maintain a record of all checking account withdrawals
Save cash-spending records

13. 2. Gather Financial Records
Before a budget can be set, an examination of past financial documents must occur
Use financial records for the previous six to 12 months to estimate income and expenses for the future

14. 3. List Monthly Income Ask the following questions:
Where does the money come from?
How much money comes in every month?
List all categories of income (sales or investments)
Determine the gross monthly income by adding all income together
Subtract the cost of goods sold from gross monthly income to determine the net monthly income

15. 4. List Monthly Expenses Ask the following questions:
What expenses are the same every month?
What expenses are necessary but vary each month?
What expenses are unnecessary?
List all categories of expenses
Divide list of expenses into two categories:
fixed
variable
Eliminate unnecessary expenses

16. Fixed Expenses Remain the same regardless of business activity
Stay constant for a specific period of time
Examples include:
rent
insurance
equipment leases
Create a subtotal for fixed expenses by adding all fixed expenses together

17. Variable Expenses May change or fluctuate
Are sometimes hard to predict
Can be adjusted based on current circumstances
Should include a miscellaneous category for unexpected expenses
Examples include:
cost of supplies
advertising expenses
utilities
Create a subtotal for variable expenses by adding all variable expenses together

18. 5. Balancing the Budget List the net income
Add the fixed and variable expenses together to find the total expenses
Subtract the total expenses from the total income
Net Income – Total Expenses =
if negative, a loss has occurred
find ways to decrease spending or increase income
if positive, a profit was made
move extra money to savings or miscellaneous account

19. Tips for Maintaining a Budget
Exercise self control and frugality
Develop an easy-to-use record system
Update and modify budgets weekly or monthly
Evaluate spending habits on a daily basis
Identify successful consumer habits

20. Increasing Savings Make saving a priority Set a savings goal
Pay yourself first by putting aside a set amount
experts suggest 10 to 20 percent of gross income
By preparing an automatic account deduction

21. What is Your Business Worth?
Owners need to know how much their business is worth
for additional purchasing and growth opportunities
to evaluate the financial health of a business
to plan for future business

22. What is Your Business Worth?
A business’s worth is determined by evaluating two main factors
assets
items of ownership convertible into cash
liabilities
money owed; debts

23. Assets
Include:
cash
equipment
buildings

24. Liabilities
Include:
equipment loans
charge accounts
rental fees

25. Net Worth Is the difference between what is owned and what is owed
Net worth = Assets - Liabilities
Is the most important factor when assessing a business’s financial strength

26. Budgeting for Small Businesses. (2001-2008)
Budgeting for Small Businesses. ( ). Retrieved October 27, 2008, from gaebler.com:
Budgeting for the Small Business. (1991). Retrieved October 27, 2008, from U.S. Small Business Administration:
Building a Small Business Budget from the Bottom Up . (2005, June 14). Retrieved October 27, 2008, from GoogoBits.Com:
Curtis, G. (2008). Six Steps To A Better Business Budget . Retrieved October 27, 2008, from Investopedia:
Wuorio, J. (2008). 8 ways to make a budget work. Retrieved October 27, 2008, from Microsoft Small Business Center:

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Technical Writer
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Graphics Designer
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Production Manager
Dusty Moore
Executive Producers
Gordon Davis, Ph.D.
Jeff Lansdell
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