What would your business like to achieve this year?
We’re a month into the new year and you’re still finding excuses to put off that budget. This month’s culprit? The Big Game. Or maybe it was school vacation or holiday break. Either way, you see the pattern.
You would be hellbent on finding a team that shows up to the Big Game without a strategy and a plan; why should ensuring your business is set-up for a successful year be any different? So before the keg is tapped and the coin tossed, here are a few budget planning tips to get you started:
1. Create a realistic budget
Your company may have ended 2017 with an unprecedented Q4, which makes this year’s goal a clear one: continue to trend that way for 2018. One of the biggest mistakes you can make is to create this year’s budget solely using information from one strong quarter. Be sure to investigate any sudden increases or decreases throughout the prior year.
Building a realistic budget requires determining revenue earned from all streams including fixed and variable costs and any one-time payments that may be coming up. Avoid setting an unrealistic budget by looking for industry trends. Also, look at historical financials and average increases, then use those findings to implement a budget that aligns with your business objectives.
2. Calculate expenses
What is the minimum revenue your company must generate to cover your expenses? Before creating a budget, take a look at your weekly, monthly, or yearly expenses associated with running your business including common overhead costs (e.g. rent, office supplies, insurance, and HR). What expenses can your company stand to cut from the budget? This could include negotiating with vendors for lower prices or paying invoices early especially if the vendor offers discounts to reliable customers.
Take a look back at each month and see where your business is coming in at, then make adjustments as needed to find the budgeting technique that fits your business.
3. Take a look at your cash flow statement
Is it costing more to run your business then what is currently coming in? Do you know how much actual cash your company has generated? Since a cash flow statement is the lifeblood of your business, it’s essential to know what your cash inflows (receipts) and outflows (payments or disbursements) are when creating a budget. If no one is tracking the cash flowing in and out of the company, your business is setting itself up for failure down the line.
4. Have long-term goals in mind
Are you looking at the big picture? Whether you’re budgeting to expand, looking to double revenue by the end of the fiscal year, or planning to sell the company, focusing on long-term goals will work as a roadmap to ensure your business continues down the right track. After determining long-term goals for the company, ensure your team understands those goals and then identify what first steps are needed to support and put those goals into action.
If you need assistance planning, improving, or building your budget for the new year, contact us today for a free consultation.