Look after the pennies and the pounds will look after themselves

Look after the pennies and the pounds will look after themselves.

Do you have an idea for a business but are put off by the budgeting side of it?  Don’t worry – you are not alone!  Many people struggle with this at the beginning because it is all new.   It is a key element to starting and running a successful business, so here are a few tips to ease you into it all.


Perhaps the very first question to answer is why.  Why do you need a budget?   The bottom line is we all need to budget to give ourselves enough money to live.  By knowing how much you need you are then in the best position to work out how much you need to charge for your product/service.


A lot of us let direct debits and standing orders take the thinking out of our regular payments, and if we have a regular amount of income each month from a salary then it is relatively easy to manage our cash flow, we know monies are coming in and going out and anything left over is a bonus and we can treat ourselves to something nice.


When you work for yourself it takes more careful planning to make sure the incomings are greater than the outgoings, not only to give yourself those all-important rewards but also to allow you to have funds available to keep your business running smoothly.


This is where planning your Profit & Loss Forecast really helps.  The first step is working out what is your own ‘Personal survival budget’.   This should include all your monthly outgoings, for example:


Utilities (gas, water, etc)

House and personal insurance

Phone and internet

Petrol and other car expenses


Food, drink

Social activities



If you often find yourself going to the ATM because you’re not sure where your cash went then why not try keeping a daily diary for one month and record every penny you spend, including those lovely coffees, cinema tickets, birthday cards, and the stamps for the birthday cards.


If you use a spreadsheet then you can add the formulas that will automatically add up the sums for you.  This means you can easily add or delete lines without having to start again.


So, once you’ve worked out a realistic personal budget you are ready to take on the business budget.


The ‘Profit & Loss Forecast’ may be scarier than the personal budget but it is based on the same principle so take your time over it and work through it carefully and before you know it, it will start to fall into place.


The Profit & Loss Forecast involves having two columns for each month for a one-year period.  One column has your forecasts and the other is for the actual money you spend.  The principle is the same as for your personal budget, so have a list of all items on which you will need to spend money, for example:

Personal budget


Advertising and promotion

Professional association fees

Premises (rent, rates, utilities)

Printing, post and stationery



Here’s how you use it…

  • Work through the list of categories (adding as many as you want) and estimate what you think you will spend on each of them for each of 12 months, ie for a whole year. Doing this exercise will greatly help you identify and work out how much things will actually cost, eg premises rent, stock, marketing, etc.
  • At the end of the first month’s trading go back to your spreadsheet and enter what you actually spent. You may find it easier to do it weekly or even daily initially until you feel comfortable with it.
  • When you get to about 9 months in, start planning your next year.
  • Resist amending the forecasts as you go along as this may not give you an accurate picture which could make future forecasting a bit more tricky.
  • Allocate yourself time to do this so that you are not feeling rushed, and set the first month far enough in advance so as to give yourself the necessary time.


By doing this you get a clear visual of your cash flow, which really will help you work out how much you will need to charge for your product/service to ensure you not only cover all your costs but you also allow for delayed invoice payments and queries and still have monies left over for those all-important and totally-deserved treats!


Lastly, don’t try to reinvent the wheel – have a look online to see if there are any spreadsheets you can download, or contact me at the Library and I will be more than happy to send you my own spreadsheet.  If you want further help understanding budgets then the Business Librarians / Business Advisers offer 121 business start-up advice sessions for a small charge.  So, don’t let your initial fear of budgets put you off – help is always at hand.

By Wendy Foster

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