With the new tax year in full swing, there’s no better time to look closely at your finances and make a plan to support your business. The good news is that you don’t need to be a financial whizz to create a brilliant business budget. Here are the steps you can take to build a budget that can guide you through the year ahead.
First off, what’s a business budget?
In short, a business budget is a record of what you plan to spend and how much revenue you anticipate your business will earn over a period of time - usually a year. A good business budget should help you to stay on top of your business’s financial responsibilities and plan ahead for the outcomes you want to achieve. Heads up, this is great if you are saving for a house or any future financial goal!
How to create a business budget
1. Make calculated assumptions
To an extent, all business budgets are based on a set of assumptions and previous experience. Your budget will reflect your ‘best guess’ on factors like the shifts you work, your own rate, inflation, last minute or bank holiday increases. But don’t worry, you aren’t expected to predict the future. Top tip: document your assumptions and the thinking behind them so that you can refer back when needed and adjust your budget in the future if the situation changes.
2. Focus your objectives
When writing your business budget, take your financial objectives into account: are you aiming for a profit, wanting to save X amount? Think about those and work your budget around that.
3. Tally up your costs
Costs are the expenses you incur in the day-to-day and are a key component of your business budget. For example, some key operational costs might be travel expenses, equipment, accommodation, personal expenses like rent or mortgage. There are three types of costs:
While fixed and stepped costs are easier to predict than variable costs, it’s important to account for all anticipated costs in your business budget.
4. Account for projects that support your goals
It isn’t just your day-to-day work that contributes to your business goals. Within your business budget you should also allocate funds for one-off projects that you’re planning outside of your usual scope of work to drive your business forward. For example, a certification in something and paying for the course. By including costs associated with each of these projects, you can ensure that you have enough money set aside to make them happen.
5. Make a calculated prediction of your revenue
While you aren’t expected to be able to predict the future, if you’ve been a locum for a while, you should be able to make revenue projections based on past financial performance - as well as any financial growth you hope to achieve. Let’s take a closer look at both of those.
Past financial performance
If you’ve been locuming for a year or more, look at your past financial performance. This will help you work out what’s achievable and will highlight any seasonal patterns that might be relevant. FreeAgent’s cashflow functionality shows you how your business has been doing and calculates a 90-day prediction of your cashflow future - not quite clairvoyance, but a great insight!
You can also use your knowledge of the locum market to determine whether your revenue is likely to be higher, lower or around the same as previous periods.
If your business is less than a year old, you may not have that financial data to pull from or the first-hand experience - but don’t panic. Instead, speak to locums in the MFL Facebook group and check out the latest SPVS survey to help you make educated assumptions about your potential revenue.
6. Piece it all together
Once you’ve collated your expenses and revenue projections, it’s time to document your budget. Don't worry too much about the format. Word doc, spreadsheet or slide deck - the presentation matters less than the planning and thought you put into it.
What’s next?
Once you’ve prepared your budget and feel confident with the figures, refer back to it regularly to check your progress. Consider scheduling reminders to review your budget to ensure it doesn’t slip off your to-do list.
Remember, your budget also doesn’t have to be set in stone - if circumstances or factors change, you’re free to make adjustments.
As time goes on, you might find that you need to tighten your belt or that you’re able to spend more than you initially thought. Ultimately it’s a tool to help you keep your budget healthy and your locum life on track.
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