A business without a budget is a business without a plan or direction.
What is a Budget?
Every business, regardless of headcount, turnover, or industry, will benefit from setting a budget. A budget provides a plan and an understanding of the impact of changes to a business which in turn allows for business owners to make timely and effective decisions. A budget is a well-thought-out document that sets targets that can be both realistic and ambitious (it is not just taking last year’s figures and adding 5% for this following year). Failure to consider what may have changed in your business or industry and where there may be opportunities to adjust revenue targets or spending decisions may leave you working hard and getting nowhere.
Why is this Important to your Business?
The benefits of a budget include:
- Understanding estimated revenue and expenditure, including expenditure that is discretionary
- Ability to check that both revenue and expenditure targets align with the strategic plan for the business
- Understanding profit margins for different revenue streams and how to maximise this
- Being able to set targets for employees – this may or may not be associated with employee remuneration but at the very least helps the whole team understand what the business goals are
- Ability to plan for future projects or growth
- Understanding where you may need additional resources whether that is people, equipment, space, or marketing efforts
- Capacity for cashflow planning
- Confidence in knowing when and how much finance may be required in the future
Set the Budget
Setting a budget is individual for each business and this is because:
- The business may have a known amount of revenue due to a large contract that cannot be renegotiated
- The business may have grown substantially from last year and costs structures have changed
- The business may have a new product or service offering
- The business has purchased equipment or has invested in software that will complete processes that were previously manual
- Industry regulations may have changed and additional resources are required to complete the same work
Hoffman Kelly can assist in working through how to complete your annual budget.
Once your budget is set it now needs to work for you and it can do this by
- Sharing the budget (or sections thereof) with relevant team members.
- Checking how your actual results are compared to your budget. If you are not achieving those targets, it is important to understand why so that you can act accordingly.
- Acting early on decisions such as investing in capital or increasing headcount.
The investment of time now to set the budget for your business will see you setting yourself up for achieving your long-term goals.
Get In Touch
Get in contact with Hoffman Kelly today to help set your business up for success this financial year.