A careful budget is the bedrock of any successful business, whether you’re a start-up or a multinational. In this blog post, we’ll look at what a good budget involves and how to create one.”
In a year’s time, how many staff will you need to employ? How many sales will you need to pay their wages? How much money will you have to invest in your business?
All of these questions can be answered by an effective budget. A budget aims to create realistic but challenging financial objectives which should tie in with your ultimate business goals.
It should include a cashflow forecast that plots the probable curve of money coming in and out of your business, and that in itself will allow you to plan for any difficult periods.
It should also include a balance sheet, containing the assets, liabilities etc; and a Profit and Loss statement, containing the revenues, costs and losses in a given timeframe.
Absolutely! Having a thorough budget should give you confidence in making the right business decisions. It should clearly plot your goals for each year giving you a really good understanding of where your business is heading.
More than that, it should give you much-needed warning when things aren’t on track. If your statements are growing away from your budget, you might have problems and you certainly need to do some investigative work.
A good budget is also a way of checking your business plan. If you want to double your number of clients, how many staff members will you need to employ? What will the wage costs be? How does that alter your income in real terms?
Not quite. A forecast is a living document that develops throughout the year, offering a summary of predicted financial performance at any given moment. The budget meanwhile is based on all the information at a certain point in time. If they are written at the same time, the two documents would look similar, but as the year progresses they are likely to diverge. The extent and nature of that gap gives you a great idea of what priorities you need to have.
Writing a meaningful budget is a bit of an art. As part of several of our packages, we offer budgeting as standard, and we can work closely with you to develop a document that helps guide you towards your goals. If you would like to know more, please contact us at your convenience.