A shopping budget can help you prevent many headaches in your day to day life. Its main function is to optimize the resources of a business, to have at hand the number of sales made and the available inventory.
Facing the task of organizing a shopping budgethaving no idea what it is, is something every experienced marketer or entrepreneur has experienced while starting their business.
A shopping budget It is focused on the optimization of a company’s resources, as well as the control of the sales achieved and the inventory.
In this text I will explain how you can create yours, what you should take into account and what to do with it. Let’s get started! 🚀
What is the purchase budget?
A shopping budget keeps a business running. Its implementation is key in the day-to-day operations of any company.
It can be defined as the tool that businesses apply to find out how many products they need in order not to stop the operation.
The shopping budget it is just a part of a larger one, called .
What is a purchase budget for?
It serves so that materials necessary to create the product or service offered in a business are always available, and thus ensure smooth operation.
In addition, it optimizes resources and their use, since business owners, by having a better understanding of what is required, how often, to what extent and other characteristics, will achieve better control of costs.
In this way they make the operation more specialized. Even storage costs will be reduced, by accurately measuring the time and raw material required.
What are the purchase costs?
The purchase expenses are the investments you have to make in your raw materiala fixed monthly expense that is needed to maintain production.
With good management shopping budgetthese expenses will be optimized in a short period, directly impacting the growth of your business.
💡 Tip: don’t lose sight of your expenses for a single moment. If you have headaches just by reading this, join and facilitate all your financial processes.
Most important elements of a purchase budget
To do a shopping budget accurately, you have to apply a simple formula.
It is necessary to clarify that putting together one of these budgets with carelessness or bad calculations could end in an overestimation or underestimation of purchase costsso your results may not be optimal.
The formula required for shopping budget it is:
Production cost (in a certain period, it can be fortnightly or monthly) + Cost of the merchandise (ideal inventory for that same period of time) – Value of the inventory that was had before adding the new raw material.
Learn more…
Article
What should you take into account before planning a shopping budget?
The formula is simple, right? Before moving on, let’s review the features to consider when planning a shopping budget.
- Sales (and production) estimate
- Value of raw Materials of inventory
- Optimum management of inventories
1. Sales (and production) estimate
To design a shopping budgetone of the first elements to consider is the amount of finished products —to call your final product in some way— that will be needed in a certain time.
How is this defined? Easy. You simply match the amount of estimated sales with the amount of product required to meet the demand.
2. Value of raw materials in inventory
How much do the materials basics that I need for my production, as well as the production cost to reach my final product? I recommend looking for more options. In the long run it will be better to have a variety of options in case one fails.
3. Optimal inventory management
The management of inventories will be of great importance for the creation of the shopping budget in any business. It is necessary to be clear about what materials you have, which ones you need and which ones you will need in the next supply.
With a perfect mapping of the available inventory, the investments will be optimized. Do not forget to take into account the policies with which you manage your business, with this you will avoid any misunderstanding and keep your finances healthy.
This will help you…
Article
How to make a purchase budget for your company in 2022?
Well, now we have more clarity about what a shopping budget but how do i make mine?
There are three basic elements to consider when assembling a shopping budget (remember that these elements fulfill a temporality, it is likely that your shopping budget change at each refill):
- necessary inventory
- Production cost
- Raw Materials already in stock
1 . necessary inventory
It refers to the amount of products that you will need to cover the demand in the established period. You must be 100% sure that, with this inventory, you will not experience production issues.
two . Production cost
This figure includes all the expenses that are needed to reach the final product. Yes, we refer to what you offer to your customers.
The procedures and materials must be included in this element of the shopping budget.
3. Raw materials already in inventory
It is the total cost of raw Materials that are already in stock, ready to be used.
Once you have these three elements clear, you have to make the formula for the shopping budget:
Purchase budget = Production cost + Necessary inventory – Raw materials in stock
After applying it you will know what you need, how often and, of course, you will find opportunities to improve quality, look for other suppliers if necessary and more information to optimize your business.
Summary
It is necessary that this budget contemplates flexibility, in case of any extraordinary situation and, in addition, be aware of the growth of the company, since it could modify the needs in a short term.
The shopping budget It must be established in a specific period, which is key to define objectives and maintain a punctual and nutritious follow-up.
Let’s review what we learned:
What is the purchase budget? Concept and definition
It can be defined as the tool that businesses apply to find out how many products they need in order not to stop the operation.
What is a purchase budget for?
Do not forget. This budget aims to establish the amount of money that will be spent on raw Materials, necessary for the product or service that your business offers. It is intended to guarantee the operation of the business, meeting the demand without setbacks and allowing better control of this fixed expense.
What are the purchase costs?
The purchase expenses are those investments that you have to make in your raw materiala fixed monthly expense that is needed to maintain production
Most important elements of a purchase budget
- Sales (and production) estimate
- Value of raw Materials of inventory
- Optimum management of inventories
How to make a purchase budget for your company in 2022?
Run the formula using these three figures:
- necessary inventory
- Production cost
- value of the raw Materials already in stock
Once you know how to make your own shopping budgetthe next step is to consider an online store that allows you to always be available to your customers.
Try Tiendanube, which offers 30 days free to start, and discover how an ecommerce platform is capable of helping your business take off. it’s easy, fast and requires no technical knowledge.💙
Facebook Comments
Disqus