It is so important that you create a budget for your business. Quickbooks allows you to easily set up a budget for the year. I want to preface this by saying that before you can create a budget, you need to make sure your books are in order. Make sure you itemize everything correctly and list as many expenses as you can think of without overkill. For instance, if you do email advertising, just create a category under marketing called “advertising” and put these transactions in there. Then in the notes you can indicate that you sent it on an email campaign.

When your books are in order, get your managers or department heads to send you a detailed document listing all of the expenses they will incur for the rest of the year. Have them point out what the expenses are (like SF tradeshow), have them give you the category it would fall under (like marketing – tradeshows), and have them give you the total cost and the date the cost starts and stops.

Now, go away for the weekend with your partner (if you have one) or CFO so you are not distracted. Plan out the rest of the year; think about everything, and I mean everything. Here is a short list:

• New hires

o Will they need medical and other benefits? When do those kick in?
o Will you need to buy a new computer? Desk?

• Anybody leaving the company?
• Equipment purchases
• Marketing Expenses

o Advertising
o Tradeshows
o Lead Acquisition

• R&D increases

You will now see on a month-to-month basis how much money you will need each month to cover your expenses. When you think you are done, add all of your findings to the budget software. Remember to show a natural increase in certain categories. For instance, categories like office expense or travel/entertainment will increase over time. If you are spending, let’s say, $200 a month on office expenses, show a natural increase of 10% per month. So month two, you would spend $220, month three you would spend $242, and so on. Payroll taxes, medical and other benefits are usually around 15% of your total payroll. Remember to increase this category as you add new employees.

At this time, you can also take a look at your current expenses and decide if there is anything you can cut or scale back on. Your budget doesn’t always have to increase.

Always round up! It is so important that you over-anticipate what you think you will need. Plan for the worst, yet make the best happen for you.

Also remember that when you think you are done, you are probably not. Are you sure you analyzed every department? Did you remember to consider vendors with whom you need to renew your contracts? Are you sure your sales manager only needs $300 in new leads in October? If you have a board you need to present this to, you want to make sure you have thought of everything possible. Of course things will pop up that you can’t avoid, but try your best to plan out your year. If something does come up, make sure to update your budget. At the end of each month, compare what you actually spent to the budget you planned. Review each category and see what you have increased or decreased. Make changes to your budget as you go along. Maybe you are not consistently spending as much as you thought you would in one category but overspending on another. You can allocate the money you are saving to the larger budget category.

A budget is a must for the entrepreneur. It helps guide you and the important decisions you have to make. You should get this down to a science so you can review mid-month to see if you are above or below your budget. Being really good at managing cash flow is one of the most important qualities an entrepreneur can have, and a budget gets you halfway there.