Budget planning can be tedious – especially if you’re not a fan of spreadsheets and number crunching. However, failure to plan for the year ahead could not only jeopardise the growth of your businesses, but potentially its existence.

The start of the new financial year in April is the perfect time to outline the vision for your business over the next 12 months, as well as the financial structure around that vision, in order to achieve your goals.

Keeping your business on track is dependent on working through a budgeting process – so here are a few tips to keep in mind:

  1. A typical business planning cycle includes a review of last year’s performance, which means your budget planning should cover a review of last year’s income and expenditure
  2. Once you’ve analysed your opportunities and threats for the coming year, you should look at your key objectives and identify any resource implications for your new budget
  3. Define the new financial year’s profit-and-loss and balance sheet targets
  4. Agree budget with your budget holders and ideally ask for their input to ensure their buy-in
  5. Review your budget regularly – ideally on a monthly basis – by monitoring sales performance figures and actual spending on one hand and adjusting sales and spending forecasts on the other

Main budget items

These are the typical incomes and expenditures that most businesses have to manage.  Balancing the relationship between these is vital to keeping your business buoyant and cash flowing through the new business.


  • Projected sales – ideally keep these realistic to pessimistic, rather than basing your forecast on optimistic estimates
  • Funding from public sector bodies or investors
  • Any other sources of income


  • Direct variable costs – e.g. bill of materials, subcontractors’ costs per product or supply of service
  • Fixed costs – overheads such as rent, salaries, staff benefits, utility bills, equipment maintenance costs, marketing, travel and subsistence, legal and professional costs
  • Capital costs – one off expenses, e.g. purchase of equipment

Profit / Loss:

  • Income minus expenditure

If you’re a start-up and/or your company is fairly small, it makes sense to have just one budget for your business. However, if you have several departments, it is better to have separate departmental budgets which can be consolidated into an overall company budget.

Key Performance Indicators (KPIs)

Comparing your budget year-on-year is one way of benchmarking your business’ performance. You can also compare your projected income and expenditure against the actual figures. If figures of projected profit margins and growth are available for your sector, then it’s worth using those as a benchmark, especially if certain trends are affecting your industry and inevitably your bottom line.

The main performance indicators are essentially your sales figures, costs and working capital. Keeping an eye on those and your cash flow on a monthly basis will help you spot problems early on so that you can proactively make informed decisions and keep your business profitable.
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