When all the expenses for a year are added together and subtracted from
the income, you will get the profit and loss statement. The profit in the
company is your 'salary'. Profit is what you can take out of the company for
personal use.

Cash flow Budget
In order to figure out your need of cash at the end of each month you have
to work out a cash flow budget.
A cash flow budget is a chronological overview of expected income and
expenses over a given period of time – often a month.

Other budgets
Besides using budgets to calculate capital requirement it is also expedient
to make budgets to foresee financial effects from the start-up as well as the
operation.

You can make an “optimistic” budget – i.e. a budget in which the start is
estimated to be better than anticipated - you gain a turnover/sales
exceeding your expectations.

Likewise, a “pessimistic” budget takes a slower than anticipated start-up
phase into account.
In both cases it is interesting to look in detail at the effects on cash flow,
capacity, physical frames of the business as well as other areas affected by
changes in the expected position.

By making various alternative budgets you will, to a larger extent, be able to
control the financial development of your company.
You can constantly monitor if things go as planned, whether you are over or
under the budgets you have worked out. Thus, you get a warning to act,
make decisions or take new initiatives in response to the new financial
situation.

You will find excel spreadsheets with pre-defined budgets at
www.DynamicBusinessPlan.com


Establishing budget
In order to estimate necessary and suitable costs prior to start-up, you must
work out an establishing budget.
How big the establishing costs get depends on what kind of company you
want to start.

If you want to start a consultancy firm working in human resource
development you might only need a telephone, a computer and an
education/skills in human resource. You probably have the education/skills
and if you start the business from home, the only expenses you need to
start is a PC and a telephone. The start will then be rather inexpensive.

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