Do you need a monthly average budget plan for your service business? Then you’ll need to follow the following steps:

1. Determine Your Projected Expenses And Income For The Year
2. Break Down Overhead And One-Time Annual Expenses Into Monthly Installments
3. Budget By Functions
4. Determine How Much Service You’ll Need To Meet Monthly Expenses
5. Plan Your Cash Flow
6. Build In An Emergency Fund

I’ll cover the first two steps in this post, and the remaining four in two more posts this week.

Create A Monthly Average Budget Plan
For Service Businesses
Step 1: Determine Your
Projected Expenses And Income
For The Year

Creating a monthly average budget plan requires that you know your expenses for a whole year.

If you’ve been in business at least a year, you start with last year’s expenses and add new expenses planned for activities not covered in the past year. Then divide your annual expenses by 12 to get the monthly average budget needed to pay your bills.

If you’re just starting your service business, you’ll have to base your first few months on projected expenses for the year, and adjust your monthly budget as expenses dictate.

Create A Monthly Average Budget Plan
For Service Businesses
Step 2: Break Down Overhead And
One-Time Annual Expenses
Into Monthly Installments

Budget items that you’ll need to average include overhead and one-time annual expenses.

Overhead includes rent, telephone, office supplies, equipment maintenance, utility bills, services and all regular expenses incurred to just keep your business open.

Some of these bills stay the same month after month, but many vary by months. You’ll need to average your payments with providers or within your budget.

For example, most utility companies will let you average your bills, but only after you’ve been a customer for a year. Then they can look at your total bills from last year, build in for planned increases, and charge you a monthly average of the annual bill.

Other items, like equipment maintenance, prove more difficult to average. As equipment gets older, it costs more to maintain it. So you’ll need to inflate equipment maintenance costs for each year that you use it.

Then you divide your inflated annual equipment maintenance costs by 12, and charge that amount against each monthly budget. This is money you set aside to cover equipment maintenance so can’t spend it on anything else or it won’t be there when you need it.

How To Create A Monthly Average Budget Plan For Service Businesses 2 covers budgeting by functions and determining how much service you’ll need to provide to meet monthly expenses.

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Posted 2-8-10:
How To Create A
Monthly Average Budget Plan
For Service Businesses 1

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