Budgeting

It is important to plan your budget, whether personal or for your business.

Personal Budget Planner: In most cases a personal budget planner should cover a period of a year because each month is different - quarterly bills, annual insurances, car servicing and MOT, Christmas and summer holidays.

I would prepare my personal budget on a spreadsheet because it is so simple to alter and update. If you prefer you can download free personal budgeting software or buy a suitable budget planner package. The advantage of buying a package is that most include free support and updates.

To start with you should list all your expenses - involve the family, they may think of things that you have overlooked (such as pocket money). Don't forget things such as your daily newspaper, which can add up to quite a lot over the course of a month.

Start with expenses that occur every month such as mortgage, travel costs, telephone, food etc. Then go on to quarterly and annual liabilities - you may find it helpful to look at last year's bank statements to jog your memory. Then list all the family income - unfortunately this probably won't take as long! If your income exceeds your expenses - you're a lucky man!

If not, you know what you have to do - increase your income or decrease your expenses. You could increase your income by taking on extra work or setting up some online business in your spare time. You could decrease your expenditure by cutting out some of the luxuries - again involve the family in this and see what they can come up with - something you consider a luxury may appear essential to your children. Just remember, plan your budget and stick to it.

Business Budget Planner: A business budget planner will usually cover a period of five years or more. This is to allow for things such as replacing computer systems, software packages, company cars and expensive items of machinery.

In business, the budget planner is usually incorporated into the management accounts. This is so that actual expenditure can be compared with budgeted expenditure. The accountant will have to investigate any significant variations between the two and report to the business.

The business will then decide if the budget needs to be altered or if spending should be brought into line with the budget. Most businesses will have an integrated accounts system which provides for budget entry in the Nominal Ledger and lets the business keep track of expenditure in every category.

Budget planning is essential for money management and forward planning. Businesses can change their plans when necessary - for instance delaying the purchase of a large piece of machinery for another year if it is still functioning well or increasing the staffing budget if they expect to take on more workers in the future.

Most businesses would be unable to function without a budget planner - it is an essential tool for an efficient business.