The Importance of Budget Preparation
Chances are, your family has a budget for things like groceries, rent, utilities, and entertainment. You keep a budget to ensure you don’t waste your money and you are building a nest egg for the future. For these same reasons, your small business needs a reliable budget to optimise your financial performance and ensure future growth.
If your business doesn’t set a budget, you’re setting yourself up for a variety of financial challenges in the short and long term. Some believe that their business is too small to budget its expenses but this couldn’t be further from the truth. No matter how big or small the business, a budget is crucial. Here are a few reasons why you need a budget and a few tips to get you started:
Your Budget is Your Plan
We like to think of budgets as a plan for future growth. By preparing and following your budget, you are ensuring your business is on track to meet its financial goals. Budgets can be set for different periods such as month-over-month, quarterly and annually. By setting your budget for short periods, you’ll be able to look back in the next quarter to see how well your business spent its money. If you blew through your budget in a particular month, you can determine the causes and take steps to avoid the same mistakes.
Start with a Master Budget
We often recommend that business owners create a master budget to start before breaking it down into smaller periods. Your master budget will outline your assets, liabilities, expenses, revenue, and other financial activities. With this master budget, you’ll be able to estimate what you believe your business will make over the long term and then adjust your periodic budgets accordingly.
Budgets Give You Control
Without a budget, your expenses could run wild since you don’t have any limits or control. With a detailed budget, you can compare your expenditures to the previous period and evaluate the areas you need to cut back and the areas that you need to invest more in. Having a budget also gives you more control over your business’ finances and when you need to prepare for additional funding for certain projects – it allows you to plan better!
Maintain Some Flexibility
Just because your budget has categories and keeps your business financially stable doesn’t mean it can’t evolve or change. Many small business owners find that expenditures and revenues often stray from their predictions, so your budget should be able to adapt. Vendors might give you a discount, sales might spike, or you could need some unexpected repairs to your business. To be successful in the long run, your budget must remain flexible.
We’re Here to Help
Whether you already have a budget or need help starting one from scratch, ABJ Business Solutions specialises in providing financial services for small and medium-size businesses in any industry. Send us your existing accounts and we’ll keep them up to date to ensure you not only have a budget but are sticking to it for future financial success.
Contact us today for a no-obligation, free consultation or email admin@abjsolutions.com.au
Joe Boyd & Tony Barakat
ABJ Business Solutions
M: +61 401 991 495
M: +61 405 534 934
E: tbarakat@abjsolutions.com.au
