Most businesses will start with a 12 month or financial year profitability budget – but these can be broken into smaller instalments or parts of the year such as six monthly, quarterly or monthly.
The profitability budget focusses on the overall revenues and expenses of an enterprise, including the items that contribute to the overall profit or loss which may not be cash items (such as depreciation).
One of the greatest challenges when preparing a profitability budget (particularly for a start up enterprise), is where to start!! I recommend looking at similar businesses, the figures of the previous owner, benchmarks from the Australian Taxation Office (ATO), and good old manual thought processes!
Hopefully you will be well researched in your chosen business by the time you get to preparing your profitability budget, particularly for the following items:
- sales – think about the goods or services sold, the customer or client base, prices and volume – and you’ll have a good basis to start
- cost of goods sold – if you are selling product, use your research and apply the costs to the sales figures you have determined
- wages – your staff requirements will also depend on the type of business you are operating, but wage rates can be determined via Fair Work – don’t forget to include superannuation and workcover…and some remuneration for yourself!
I hope this helps with your budgeting processes, good luck!