By Chris Mandzufas
A realistic and detailed budget is crucial for guiding your business to tackle unexpected challenges and to ensure you stay on track to grow.
It may seem obvious that business growth can only occur when there is money available for reinvestment, but it is surprising how many businesses do not budget and do not track their performance against a budget.
In the current environment, a realistic and detailed budget is a very important tool for providing valuable information, guiding your business to tackle unexpected challenges and most importantly to ensure you stay on track to grow.
Even though many businesses have been affected by the impact of the COVID-19, it is important for businesses to come out the other side and with their team set a budget to grow their business for the next 12 months.
Not having a budget could be like driving a car in the dark without lights on – how do you know where your business is going? A robust budget will help you identify the cash from operations you can generate, identify the capital you need to grow your business and consider any debt and income tax obligations you need to consider as your business moves forward.
Another way of thinking about your budget is as a way of measuring your business’ performance against expectations. That is, each month tracking actual revenue and expenses and comparing them to what you had budgeted.
For example, if your sales are lower than you had budgeted you have the opportunity to review and debate why and take corrective action immediately. Conversely, if you exceed your sales targets you can review the key reasons why and focus more energy in leveraging that knowledge in future periods.
If you are running your business without a budget, you may find you are actually wasting energy, being inefficient and not meeting your long-term goals. By taking the time to set a proper budget and manage that budget you will give your business the best chance of achieving its full potential.
If you need any help with your budgeting process, please do not hesitate to contact me or our office on (08) 6212 7200.