When you’re running a business, it’s easy to get bogged down in day-to-day problems and forget the bigger picture. However, successful businesses invest time to create and manage budgets, prepare and review business plans and regularly monitor finance and performance.
Structured planning can make all the difference to the growth of your business. It will enable you to concentrate resources on improving profits, reducing costs and increasing returns on investment.
In fact, even without a formal process, many businesses carry out the majority of the activities associated with business planning, such as thinking about growth areas, competitors, cash flow and profit
As your local accountant in Chatswood and greater Sydney, MYM Accounting & Business consultancy can help you create your budget and monitor your progress throughout the year. In this article, we would like share some best practices.
Creating a plan is the first and foremost step of a purposeful budget. It is an essential step for bringing structure and sustainability to your financial plans. A budget plan answers questions such as:
- How will the budget help streamline financial details of the business?
- What resources – human and otherwise – are needed for the business?
- Inputs and outputs which may impact the business; the potential pros and cons?
Objective/s are what give structure and shape to the plan. It is the goals which must be set out to achieve in the process of preparing the budget. Whilst charting-out objective/s, it is important to:
- Consider your present, on-going and foreseeable needs
- Progression plans for the business.
Analyzing Insights & Trends:
Insights, especially from similar businesses or your previous year’s figures, prove to be a significant tool in creating an accurate budget. Valid insights can help the business:
- Understand what has worked in the past and define the areas of improvement therein
- Create financial growth plans and set out achievable expectations for the budget timeline
Before you set out to design the budget, consider deep-diving into the business’s existing insights and trends. As your local accountant in Chatswood and greater Sydney, we can also help you do a competitor analysis. This will illustrate a complete picture of the current financial status of the business and that of the competitor and help in the creation of financial goals accordingly.
A SWOT (strengths, weakness, opportunities and threats) analysis is a great way to analyze the internal capabilities and constraints of a business and delineate external forces and put them to purposeful use. It provides an in-depth picture of what has worked in the past and the areas of improvement therein.
Use of a good template
As your local accountant in Chatswood and greater Sydney, we can design a robust budgeting template that can captures all the key elements of your business. It is important to think about the past, present and the future and design a template which incorporates multiple business scenarios. There should be various checks and balances in the template which will improves the credibility and reliability of the data.
The right people must be made part of budget planning and preparation at different levels. Before the budget is designed, it’s healthy to practice check-in with your human resource and their department goals. The goal setting for the budget must involve all stakeholders and the same stakeholders must also buy into the budget.
The creation and materialization of the budget is a two-way street because it entails taking feedback and suggestions from employees and involves management discretion and ability to strategize. Consulting with employees is important in creating the budget because it helps to set realistic goals; after all, they are the ones who will help achieve these goals. Involving employees in setting budgets also enables the management to create buy-in to achieve the organizational goals because employees take ownership of having decided to set certain targets. Moreover, the team must come together to:
- Set expectations and resource allocation for the budget
- Strategize and hone internal plans of execution to achieve the objective
- Work in collaboration with different departments and in alignment with financial goals set out in the business to achieve the vision of the company
Creating a budget can be a lengthy exercise but is purposeful in many aspects. To make it adaptable, some useful approaches are as follows:
- Keep the objective clear
- Set-out realistic goals and timelines
- Be mindful of the evolving nature of the business landscape and leave room for spontaneity
- Create a budget that is fluid and flexible
- Create assumptions, best and worst-case scenarios
- Review it on a regular (monthly and quarterly) basis and make changes accordingly
Remember that for businesses to achieve their vision, the vision must be broken down into manageable tasks that can be measured through relevant metrics. Budgets play an important role in this respect, and accountants, with their expertise and knowledge, can help develop budgets that are fluid, flexible, and achievable.
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