The Importance of Having Budgets in the Business

Budgets – Why do I need it and how do it do it??

A question we get asked several times. 

Really do I need a budget. Well if we do not plan well, if we do not know where we want to go, chances are we are not running the business the way we wanted. So yes Budgets play a key role in our business taking us in the direction we want our lives to go to.

Never set a budget before? Here are our top tips to get you started: 

  1. Start somewhere – Whether this is your first or your fifth year setting a budget, every business needs to start somewhere. Budgets allow business owners the ability to hone in on cashflow, reducing expenses, and increasing profitability. Having a budget will improve your financial control over the business.
  2. Use historical trends – Review your books from previous years to determine any trends in your spending or earnings. This would help you identify the problem areas and allows you the opportunity to rewrite your spending future. Reviewing this data enables you to make informed, educated decisions and realistic plans for your short- and long-term budget goals.
  3. Get technical – Review your financials in a profit and loss format. The profit and loss statement will summarize the revenues, costs and expenses for a specific period. To put it simply, a profit and loss report shows you the true profitably of your business and will enable you to plan your budget more accurately.
  4. Plan big picture – Where do you see your business in the next 1, 3, or 5 years? Imagine it, plan it, write it down and then break it down. Now that you’ve got your eye on the prize, the question is how do you get there? Break your yearly goals down month by month. Tightening the budget down to months reduces the risk of overspending and over projecting profitability.
  5. Make it accessible – Once you’ve finalised your budget it’s time to enter it into your accounting software. Putting the budget into an easily accessed software helps keep it manageable and helps keep you accountable. 

Need help establishing a budget? We’re here to help! We at Sum and Substance work closely with businesses helping them set budgets and plan their financials for the year ahead. So, let’s set a goal to makethis new financial year and beyond the most successful period for your business.