If you are not going through an annual exercise to create a budget for your business, you may not be seeing the full picture of your business.

While most business owners wait until the 4th quarter of the business’ fiscal year to create their budget, doing so can cost your business greatly…

Creating a budget in the early months gives you a springboard into the upcoming year. It helps you plan for what you want your business to achieve in the upcoming year.  Once you have a budget in place, you can then use it throughout the year to compare expected performance with actual results, identify any variances, and take action. Budgeting allows you to maintain control of your business and make timely adjustments in your processes or spending.

Since the budget includes details about the company’s revenue and expenses, start by looking at your company’s historical information and consider the following:

• Revenue or income streams:

  • Will there be any changes this year? Are you planning any price increases?  Increasing or discontinuing certain product lines or services?
     
     It is a good exercise to look at a financial report showing revenue by month to identify seasonal trends in your business. This will ultimately help with cash flow timing.

• Expenses:

  • Identify fixed costs that don’t vary month to month based on sales or revenue.  Make sure your business’ cash flow can support these fixed costs.

  • Look at variable expenses that can be scaled up or down depending on the state of the business and the sales that are coming in.

• Staffing needs:

  • Put together a thoughtful staffing plan that matches your budget so you won’t get caught in an unexpected situation.
     
     Make sure you identify the staffing needed for the level for which you are budgeting.  Paying people that you cannot keep busy or overworking your existing staff can create issues down the line. 

• One-time items:

  • Whether it is a non-recurring revenue item or expenditure, be sure to build these costs into your budget.

• Cushion for unexpected items:

  • What happens if your computer infrastructure or laptop crashes? Will you still be able to run your business?  Do you have funds in reserve to handle unexpected events?
     
    All budgets should have a reserve for unexpected events and changes. 

Creating a monthly budget may feel like a hassle, but it is essential to making conscientious financial decisions so your business can stay on track and grow.

Each New Year presents us the opportunity to hit the restart button. Be sure your New Year refresh helps you see your business clearly and have your most successful year yet!

We can show you how to create a budget in QuickBooks and view financial reports that will allow you to review actual versus expected results throughout the year.