Small business owners: Three steps to prepare a business budget for the next financial year
You know you need it - but where do you start?
A business budget for the next financial year is a necessity for any small business.
Without budgeting and forecasting, it’s almost impossible to grow your business strategically. In fact, a business without a budget is like a teenager with a credit card: no one knows how things are going to turn out or what damage might be caused!
As an adviser for small businesses, we present some insider tips on the three steps you need to take to budget for the strategic growth of your business in the year ahead…
How to prepare a business budget in three easy steps
1. Make your budget ambitious but realistic
Your business budget should be ambitious but realistic.
You want to be kicking goals and getting rewards. So, set your yearly gross profit at five percent; decrease inventories by two percent by end of financial year; and reduce overhead administration costs by a percentage of turnover equating to three points.
Set 3-5 achievable and ambitious goals that your business budget can aim towards.
2. Plan how you’re going to achieve these goals
Aim to increase sales to achieve these goals, while reducing business overheads and cutting costs.
If your business is small, around 5-12 people, your capital expenditure will not be high. As your employees grow, though, your budgets and goals will need to broaden also.
Make your assumptions accurate and be specific about the actions required. You may have the goal of increasing revenue by five percent over the next year, but how will you achieve that?
Adding skilled employees may bring you closer to that mark - but could extra training for your current employees reduce the overall expenses?
You might play with the idea of lowering or raising the prices of your product or service. Think about how this could be reflected in your goals.
Are there new markets that your business might excel in? How can you create visibility in those spaces for your service or product?
3. Quantify ideas with figures
Once you’ve brainstormed the main questions, quantify your ideas into actual figures. Compare training costs to salary costs and how that might increase or decrease expenditure over the year.
Remember, all the time and effort you spend on preparing a business budget for the next financial year is reinvestment into your business.
But you don’t have to go it alone.
Ascent Accountants in Cannington are specialist small business accountants for the Perth area.
We’re available to help you create a business budget and to develop strategies that help you achieve your small business growth goals. Contact us here.