Budgets can feel like a daunting and unnecessary task for many small business owners. However in a fast moving business world this couldn’t be less accurate.
The demise of most small businesses is due to a lack of planning and mostly due to not being proactive enough to see the writing on the wall in time to make changes.
This is where budgeting and periodically tracking to budget can help.
Budgets are an easy way to identify sales and financial goals and in turn provides boundaries on spending as well as clear direction and a path forward to achieve those goals.
It provides insights into your business and assists in focusing on where to direct your resources.
It highlights if your goals are realistic and achievable.
Many business’ take too long to react to changing environmental factors.
In some instances focusing on the numbers once a year at tax time is most likely too late.
That is why setting a yearly budget broken down by month at the start of each year helps businesses focus on where the goal posts are.
Then monthly or quarterly tracking of actual results to budget highlights the financial health of the business based on what was planned at the start of the year.
It's a great way to be familiar and on top of your books.
The process does not need to be daunting or scary.
It starts with:
Thinking about all your costs/expenses and your projected revenue based on previous years numbers.
Planning for growth in sales and the costs that are anticipated with that growth.
The process forces you to have a focus on your short and long term business direction.
Most cloud based accounting systems such as Xero and MYOB allow for this to be easily accessed and tracked at the click of a button once set up.
It’s quick and it’s easy.
Think of an effective achievable budget as your financial map to assist in achieving your goals.
It helps gives businesses motivation in something to strive towards and it’s a great feeling when you over achieve.
The time for budgeting and planning is now.
If you, like many of our small business clients, simply need help to get started, call us today to have a chat on how to effectively manage or set up your new budgeting process.
Tier Accounting is a Chartered Accounting firm servicing Bayside, Mornington Peninsula and greater Melbourne across accounting, bookkeeping, business partnering, cloud set up and support and marketing.