Better budgeting in any business pays off. It allows you to plan ahead, save for the future and make better business decisions which in the end is invaluable to how successful your business will be. Clever budgeting and cashflow forecasting helps you understand your actuals versus your estimates so you can reap those financial rewards you work hard for.
Why is budgeting so important? – Tip 1
Budgeting and cashflow forecasting is similar to strategic planning. It gives you beneficial insights into what is really going on in your business; rather than guessing or estimating. Your accountant is the one who can help you identify serious overspending or unnecessary spending and help you put a realistic budget together.
Being able to understand if you have enough money coming in to expand, recruit another staff member or invest in marketing means you have to have a budget and a forecast so you can make smarter decisions on when to move and when to stick. It’s having the ability to plan ahead and know when to take action.
How do I budget? – Tip 2
There are many ways to set up a budgeting system but with clever software this job has now become a lot easier for many business owners. Smart online software has become almost intuitive because the better information you put into it; the better information you can extract.
Being able to read all the numbers can take a bit of preparation and help from your helpful accountant but once you’ve got a hang of it, we think you’ll actually start enjoying running off monthly or daily reports that help you keep a sharp eye on things. It’s a good idea to have a regular day of the month or week to run off all your reports and if anything scary jumps out at you then your accountant is only a phone call away to help get it sorted, and usually very quickly.
Even a simple spreadsheet with ins and outs at the beginning of your start up is better than nothing because you really do need to get your head around the numbers if you want to keep your head above water.
Revenue versus Expenses = Profit – Tip 3
At start up phase it’s harder to predict what your profit will be but never be afraid to ask the experts because it’s highly likely they’ve worked with a similar business before. The key to any business is to make it as highly profitable as you possible can and that’s why budgeting and forecasting are so important.
You need to know what’s coming in but also what’s going out to reach that profit number. If you’re spend is bigger than your revenue, then that is a sign things need to change. Once again expert advice will help you “see the woods for the trees” and is always a great investment for your business success. If you’re unsure of your market and how it acts during different seasons or months of the year do as much research as you possibly can and talk to those in the know. For some, school holidays are when it starts to quieten down whereas for others it may be boom time. It’s not about gazing (or dreaming) into a crystal ball, it’s about getting those cold hard facts together.
Review, Review, Review – Tip 4
Some businesses review once a year whilst others review every month. It’s a good idea to review on a more regular basis, especially for small businesses because business can be volatile and unexpected, large costs can throw out that balance sheet by quite a lot.
If you are caught out by a nasty surprise work on a plan to increase your revenue and/or cut back your costs. Because you have a budget and forecast you have all the information on hand to act faster.
One way to cut back costs is to review your suppliers and see where you can get even better value for your money. This procurement process is very helpful and it allows you to seek beneficial opportunities with key suppliers who are normally more than happy to negotiate a lower price so you become a long-term customer. What you’re looking for is the best deal in town.
To increase revenue, review your prices or rates to see if you’re charging enough or if you can, go back and do some remarketing with your loyal customers. There are many ways to use a review and all of them require clever budgets and forecast reporting as a starting point.
Ask for Help – Tip 5
We’re always surprised when people say they would have come and seen us earlier to help with their business budgeting or forecasting only they were too embarrassed. We would much rather help businesses out at the beginning only because it makes your life easier. It is hard work running a business and you can’t be expected to be the expert at everything. It’s impossible.
Over time you will gain confidence with your numbers and knowing who is the best person to help out where but only if you ask. In New Zealand we’re a bit too proud and sometimes stubborn, but once you find a great accounting team, they’re like your personal financial help heroes saving you precious time and money.
At Accounting One we’re a very passionate team who want to help you get your head around budgets and forecasting because we are driven to help you succeed. To get started book in for your one-hour consultation and we’ll help you boost profits and maximise your growth potential.