Budgeting is Play an Important Role

You can't run your business successfully without a budget. Nobody can. Cash is slippery and cost rise unless closely watched. You can't borrow money from a bank, secure trade credit, or attract investors without a budget.

Your operating budget serves a variety of purposes. It helps you hold down spending, provides and supports financial self-discipline, and helps you set time-lines and measurable goals. It gives you a scorecard, a way of seeing how well you are ding and whether or not you need to change some business behaviors.

You don't have to become an accountant to understand and use a budget. In fact, you are already familiar with budgeting from handling your personal finances. All your operating budget does is set down the expected amounts and timing of revenues and expenses in a standard form that can be used to strengthen your business decisions. Your operating budget allow you to know when you need financing - and when you don't.

No horse gets anywhere until he is harnessed.
No steam or gas ever drives anything until it is confined.
No Niagara is ever turned into light and power until it is tunneled.
No life ever grows great until it is focused, dedicated, disciplined.
- HARRY EMERSON FOSDICK, D.D.-

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Facts Impress Bankers while Guesses Do NOT.

It is important to be accurate and descriptive and to use vendor sources rather than guesstimates for start-up costs.

The process of going over start-up costs again and again, looking for economies and ways to lower those costs, is excellent practice for actually running your business. Careful cash management is one of those business skills that spells the difference between success and failure.

You will be very accurate in projecting start-up costs if you speak with vendors, check out catalogues and price lists, and look for hard (as opposed to approximate) prices. Don't guess. A businesslike listing of assets will help you build credibility, especially if you can show that you have indeed done everything reasonable to hold costs down.

Accuracy also pays off when you sit down with your banker and explain why you need to borrow money for your start-up. That portion of the start-up costs you pay for personally will show up as part of your investment in the business and can on occasion be used as collateral for a loan. Facts impress bankers. Guesses do not.

Use the form called "Start-up Costs You Only Have to Pay Once" to organize your start-up costs. Not all items will apply and you may have to add others.

Remember that you can't run a business without cash. Working capital is defined as current assets minus current liabilities - but for now, you can estimate working capital plus contingency needs to equal the costs of running the business for two months.

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