The new year represents the perfect time to set goals for your business, and one of those goals should be to create a planning budget for 2019.
To help you through this process, as your accountants, we’ve created three simple steps that will help you design an effective budget for 2019.
Step #1 – Create a Clear Vision
To achieve your business and financial goals you must have a clear vision of where you are going. Any vision demands good budgeting.
Here’s why:
• Budgeting allows your team to understand the finances supporting the vision.
• All parties know where the money is to be spent, and just as importantly, where it is not to be spent.
• Cooperation amongst your team is essential, and that relies on trust. For example well-documented and communed budgets generate a feeling of job security.
• The knowledge that you have the cash to achieve the goal supports morale, driving productivity.
Step #2 – Create a Simple Strategy
Running a business or creating a personal finance plan, without a strategic plan is like trying to reach your destination without a map. The fact is an accurate and current budget is central to any strategy.
Here’s why:
• Money is the primary resource that drives action. It provides for everything your business aims to achieve.
• A business or a personal finance plan that grows steadily and consistently has strength. Your budget will allocate funds to ensure the cash is available when and where it’s needed.
• Budgeting provides a snapshot of what can be achieved and when. It helps you identify short, medium and long-term goals.
• If your budget allows for the unexpected – which it should given rapid change is becoming more prevalent – the money for capitalizing on new market opportunities is always on hand.
• Without control over spending, any strategic planning is futile, which means the business has no goals to strive for.
• Budgeting fuels plans for expansion, taking your business or personal wealth to the next level.
Step #3 – Real Results
The goal of the business’s or Personal Financial Plans’ vision and strategy is always to get real results. And the ability to measure those results is the only way of knowing how well they’ve been achieved.
Clearly a budget is essential to measuring them:
• Profit and loss budgeting sets income and expense information against the strategic plan for the period to produce figures.
• Profits are what fund expansion. You must know your profit or loss figures to plan for growth.
• Historical results are important for budget projections and future planning.
If you’d like help to get started right away with business budgeting, your accountant is ideally placed and qualified to handle it.
Click here to contact us and one of our team will be in touch to discuss setting up a budget with you.
Alternatively, contact us during office hours by calling 0404 847 857
*The Australian Securities and Investments Commission report into corporate insolvencies for 2017-2018 found 46 percent of businesses suffered poor strategic management and 49 percent had inadequate cash flow or high cash use.