Last week I asked if you had set your goals for 2024.  Now you have had a week to complete the goals, but my next question is, have you set a budget for 2024?  Even if you have not set a budget for the whole year, did you set a budget for January 2024?

This was originally posted a year ago, and I hope some actually did their budget then and followed this process.  Now, we are going to review this budgeting process and create a budget for 2024.

Just as setting goals, creating a budget is a process.  In fact, there are several ways to create a budget, but here is a process that is not overly complicated and easy if you have never done this before. 

Your budget is essentially a list of expected income and expenditure for the period of the budget.  Here is the process:

1. Income:  List your expected income (in the case you are a farmer, income may be periodical, but that does not matter, you just take the total income for the period and divide it by months to get the expected monthly income).   There is a difference between the calculated income and the actual cash flow.  But we can ignore that for now.
2. Expenses:  Here you will list all the business-related expenses, including your salary.  I know that many farmers and small business owners, do not calculate their own salary as an expense, since they take the net income for personal use.  However, it is very important to divide the business income and expenses from your personal income and expenses.
   1. You start with all the fixed expenses.  Expenses you have every month for the business to run, such as utilities, payments of loans, and other fixed monthly expenses.
   1. Then you list all other expenses you may have related to the business.
   1. Finally, if you have written down your goals, and the action plan for each goal, you will list the additional costs you may have to incur for you to achieve your goals.  For example, if your goal is to grow your farm, you might have to make an investment, break new ground, purchase additional seeds, fertilizer, etc.  These expenses should be linked to each goal against any additional income you linked to the accomplishment of each goal. 
3. Saving:  What is left, after you subtract the expenses from the income, is your gain.  This gain is, at first, listed as saving.  What you do with this saving, depends on your goals. 
   1. You save it and create funds for the future.
   1. You invest it back into your business (farm), to increase profitability in the future.
   1. You spend it (not recommended).

Once you have the budget done for the year (it’s useful to create 12 columns on a paper or spreadsheet, one column per month, and list the income and expenses in the month they will occur), you will review it, and evaluate it by the end of each month, to see how close you were to reality.  All discrepancies, positive and negative, must be analyzed and adjustments made for the future.

For example, by the end of January, you will compare the results to your original budget.  Then you will evaluate all discrepancies and take everything into account when you do the budget for February.  This you will do every month. 

Besides the monthly closing evaluation, it is important to take a look at the budget on a weekly basis to see if you are on target or not. 

Stay put and follow Agri Project Africa for information like this and stories of farmers around the continent achieving great things.   Please share this content on your platforms, and tag anyone you think may have use for this information.