Budgeting - How to ensure proper budgeting!

Learn how effective budgeting can help your business plan and manage finances better. Gain insights into strategies and tools to optimise your business financial planning and ensure long-term success

A Guide to Effective Financial Management for Businesses and Online Shops

What is budgeting?

Budgeting is a central process in both accounting and business operations, involving the planning and control of financial resources. A budget is a forecast of expected revenues and expenses for a specific period, typically a year. Budgeting helps businesses anticipate future financial needs, set goals, and make informed decisions.

Budgeting in accounting

In accounting, budgeting is an important tool for managing a company’s finances. It involves creating detailed plans for all aspects of the business, including revenue, costs, capital expenditures, and cash flow requirements. Budgeting helps the accounting department monitor performance, identify deviations from the planned budget, and take corrective actions.

Budgeting for webshops

For webshops, budgeting is crucial to ensuring profitability and sustainable growth. A budget for a webshop typically includes estimated costs for inventory, marketing, technology investments, and operations, along with projected revenue from sales. By creating an accurate budget, webshop owners can plan campaigns, manage inventory, and optimize operational costs.

How to use budgeting in practice

To illustrate how budgeting can be applied, let’s look at an example. Imagine you own a webshop that sells electronic gadgets, and you want to create a budget for the coming year. Here are the steps you can follow:

Example of budgeting

1. Set your goals: You want to increase sales by 20% in the coming year.

2. Estimate revenues: If your current annual revenue is 1,000,000 DKK, a 20% increase means you expect revenues of 1,200,000 DKK.

3. Calculate expenses: Account for all costs, such as:

  • Inventory purchases: 500,000 DKK
  • Marketing: 200,000 DKK
  • Technology investments (website, hosting, etc.): 100,000 DKK
  • Other operating costs: 150,000 DKK

Total expenses: 950,000 DKK

4. Calculate expected profit: Subtract the total expenses from the estimated revenue:

1,200,000 DKK (revenue) - 950,000 DKK (expenses) = 250,000 DKK (expected profit)

5. Monitor and adjust: Throughout the year, you monitor the actual figures against the budget and adjust your strategies to meet your goals.

Learn how effective budgeting can help your business plan and manage finances better. Gain insights into strategies and tools to optimise your business financial planning and ensure long-term success