5.2 Investment table / budget

 
In this topic you will learn to calculate basic investment table`s and budgeting. To create your investment plan / budget you can also find free accounting programs from web. If you don’t have an accounting software program, you can use a basic spreadsheet program. One of the most difficult part of a budget is to estimate sales for your new company. It would be good to estimate your sales in three different perspective:

• Best case scenario, in which you show your most optimistic estimate for first six months to a year sales.
• Worst case scenario, in which you show your least optimistic scenario during the first six months to a year.
• Likely scenario, somewhere in between, most realistic.

If you have no past information to go on, you must create the budget using your best guess on income and expenses. When you start discussing with investors, they are interested in knowing the argumentation behind your numbers. You can use:

• Market research
• Web search volume
• Pricing validation
• Contracts with suppliers
• Conversion rates

You can divide your financial planning in three parts. First part is your income part (profits and losses). This part includes revenue, expenses, gains and losses. These four elements gives you the net income of your business. Cash flow statement gives you understanding of your business will run. A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving your business. General overview gives you information in widescale and includes assets, owners’ equity, liabilities etc.

Your cash flow is a key tool for keeping your new business a float. You also have to remember that cash flow is more important than profits. You can be making a profit on paper. If you don’t have money in the bank, your business won’t be able to pay its bills. You need to have enough of working capital so you can continue purchasing your inventory items and pay your bills while you wait for the payment from the customers.

Monthly budget gives you an understanding of your revenue and cost per month and your ability to pull salary for you. Revisit your budget and plan regularly, it will help you to determine whether your business is on the right track. Yearly budget gives you a look over the full year of your business from revenue to expenses. Also, if you have investors they will focus on yearly budget.

Here you can calculate the basics for the budget. You can also use the same model in monthly budgeting.

Balance (Total 1 -Total 2)