This was originally written for a startup, but can be used for anything.
(1) Project plan.
Get a big piece of paper and/or whiteboard.
Sketch out what you're going to DO for the next 6 months, timeline style.
Then figure out what resources you need to do each of those things, and what activites have to happen, and add all that onto the timeline: which people -- do you have to hire? When do those folks come in? Where are you going to be? Do you need any tools? When do you need to have them purchased by? What's your marketing plan -- are you traveling? Need to get something printed up and distributed?... See what I mean? Most people can think through what they're going to actually do, and of course this is a very useful exercise.
The tricky part comes in when you don't know how things are going to go, because maybe a big decision depends on something you don't know yet. The way to handle this (heh! you're going to LOVE this...) is to make TWO project plans from that point onward. Limit yourself to a few major changes; if it's too uncertain then really what you're saying is you can't plan the project that far out. In that case, plan what you can, and revise as you know more.
Be as specific as possible. It'll probably take you at least 3 rounds of saying "OH SHOOT I FORGOT...." and re-doing it before it's stable enough to continue.
(2) How much does your project plan cost, and when?
Open an excel spreadsheet.
On the leftmost column list all the things you think you're going to need to spend money on. Forgot something? Put that back into your plan and work it through again. (If you're not sure, look at a tax form.)
Across the top, write the date for each week starting Monday. (If you don't know this about excel, if you write a couple weeks, and then do a fill, it will keep to the pattern you've started.) So 11/1/2013, 11/8/2013, 11/15/2013 .... etc. for 6 months.
Look at your project timeline. Is everything you need to buy in there? (If not, go back and add it in.) Ok, then write down about how much you think you're going to spend in the week that you think you're going to spend it. (Yes, you can do this by month or by 2-week intervals, whatever you want.)
Along the bottom, add up each column, week-by-week.
(If you don't have a stomach ache right now, you either have a very generous seed round or you're missing something -- have you forgotten salaries? This is a normal part of being an entrepreneur.)
Mess around with your plan -- this is where prioritizing and killing off bits of your first six months is important. Scale back your expectations. Remember everything that you can squeeze out of your cash flow means you can have a bit longer runway.
(3) Now, below all that, you can add in any revenues.
First 6 months? Doubt you'll have any, but if you think you will, then go ahead and write two lines: the most you think is reasonable you'll get, and the amount that's so low you'd be shocked if you don't make it.
So let's say row 90 was the total of your expenses for the week.
Then row 91 would be the highest expected revenue, and row 92 would be the lowest -- could be zero.
Then you add two rows below that, subtracting the total cost for that week with the total revenue for that week -- the high revenue, and the low. This will give you your weekly profit expectations.
- (row 93)= (row 91) - (row 90) -- this is your biggest possible profit
- (row 94) = (row 92) - (row 90) -- this is your smallest possible profit
But you really want to know how much CASH you have. So below those two rows add a final row: You start with the bank balance day one, then you add the revenues and subtract the costs each week.
This is a little different to construct, because instead of summing up everything in a column, now we're traveling across the page.
So, remembering that our lowest profit is given in Row 94: if the cell B95 = $50,000 because that's what your angel investor gave you, then C95= B95-C94. And D95=C95-D94. Etc. That gives you a running balance of your worst case projection.
(4) Translate your weekly cash flow to a monthly budget.
What I like to do is start another tab, copy-paste the same left-column categories, and then just add up 4 weeks at a time. You have to fudge a little bit -- every few months you'll need to add 5 weeks -- but it's close enough.
That should work out to be something smooth. It's at this point you can hand this to a pro and ask them to make it industry standard for you if you need to show your budget to someone.
(5) Pay attention to this as time passes.
You can and should keep track of how it goes in real life, and enter ACTUAL information into a copy of the spreadsheet as you go. That way you can look over what you did and see where you guessed well and what "went wrong."
If you're blowing through your budget, you should know that you are, and why it's happening. If your projects change, re-do the budget. This is basically the cardiovascular system of the company. If you need an infusion, and you can get it, then YAY. But you should know you're getting an infusion. And if you're simply bleeding out, well, that happens, but you should know and see if you can figure out a way to stop the bleeding.