I often hear my new clients say they don’t need to do a budget, they know what money is coming in and what money needs to go out. If they don’t have the money they simply don’t buy it.
That’s ok while you are a small business but when you are ready to grow your business you will need some form of financial plan and that is quite simply what a budget is – a plan of how and when you need to have money available so you can fund your growth so you don’t suddenly find yourself with a bill due tomorrow but no money in the bank to pay it.
Creating a budget is actually very simple, get your last 3-5 years of financial accounts, load the profit and loss lines into a spreadsheet, fill in the amounts of income and expenses for each of the 3 years, look for trends and you will be able to make an educated assumption of the next 2 years figures – decide if that is going to allow for your business to grow its profits, if not change the figures to what you can work to and you have a budget!!
Remember to add in anticipated costs for growth (investment in machinery, wage increases, sales increases), remember to add in your drawings and loan repayments (items from the balance sheet) and you will have a budget to assist you in making informed decisions for your business going forward.
Let us make it even easier
One mistake a lot of business people make – they create a budget then never look at it again until the end of the financial year to see how close they got … fatal mistake!!
A budget needs to be a working document that needs to be considered for EVERY business decision so contact Jerome today for a budget tip sheet and grow your business with confidence. Phone 0800 747 323