As the new year approaches, it’s time to give some thought to a new budget. Being on top of your finances is a great way to start the new year out fresh and we want to help you get started on the right track!
In this article, we will highlight the benefits of having a proper budget and the steps to take to bring a budget to life that will make your business proud.
Let’s Get to the Point: You NEED a Business Budget
If the introduction wasn’t enough to convince you, hopefully, this will do the trick.
Let’s take a deeper dive into these positives.
Mastering Financial Planning with a Business Budget
First and foremost, your budget will serve as a roadmap to your organization’s finances. Using this roadmap, you can set achievable goals for your business to aim toward.
Not only that, but the budget also gives you a sense of direction on how to reach the goals you set. It’s a win-win!
Putting Your Money in the Right Places
Have you ever wondered if your money is going to the right place? If so, you’re not alone.
Budgets are a great way to allocate your resources optimally and make sure your business is getting the most out of those hard-earned funds. You can also spot areas where funds are being misallocated or identify areas of overspending and make changes as needed for the coming year.
Keep Your Expenses in Check
To put it plainly, your budget will give you a better understanding of how much you are spending and how much you are supposed to be spending. If anything is not matching up for you, now is the time to make those corrections!
Stay on Top of Your Cash Flow Management
To allow you to stay on top of your cash flow, your budget forecasts income and expenses for the coming year. Having this foresight allows you to plan accordingly and ensures you are ready for any curve balls that may come your way in 2024.
By planning ahead, you can prevent cash shortages and make sure there is enough liquidity for these potential issues.
Cross-Check Decisions with Your Budget
Last, but certainly not least, your budget aligns financial activities with the overall goals of your business. It enables you to ensure that your financial resources are being directed toward activities that are supporting the strategic objectives of your company.
Steps For Bringing a Business Budget to Life
1. Gather ALL of Your Financial Info
And we do mean all! The more you are able to bring to the table, the more informed your final budget can be to meet the needs of your business. For starters, you will need:
- Historical Data
- Sales Projections
- Fixed and Variable Expenses
- Debt and Interest Payments
Other documents that you feel would be helpful should be brought as well. For the best budget possible, a complete picture of the prior year’s finances is crucial.
2. Map Out Your Revenue Projections
When mapping out your revenue projections, it is important to be realistic. It is also important that you consider multiple scenarios when creating your projections.
For example, consider your best and worst case scenarios. How would you tackle these scenarios? By preparing for several outcomes, you are setting yourself up for success in the new year.
3. Hammer Out Your Expenses
Expenses – everyone’s favorite topic. Well, maybe not, but a topic that needs to be discussed nonetheless. For budgeting, we recommend breaking your expenses into categories and figuring out what you will need to allocate to cover them. Be sure to factor in capital expenditures when doing your figuring. As with everything else, it doesn’t hurt to have a contingency plan as well. It pays to be prepared.
4. Stick to the Budget Like Your Life Depends on It
Now that you’ve done all of the work to create your budget, you only have to do one thing: Stick to the budget! Easier said than done.
As we move through the new year, make sure to monitor your progress regularly.
- Is your budget doing what you made it to do?
- Does it need adjustments?
If so, don’t worry! It is okay to make changes when they are needed; just make sure you are covering all of your bases before making any drastic changes.
Don’t Toss Your Budget to the Back Burner
Your budget is such a powerful tool for planning your finances, ensuring your money is being used in the right places, keeping your expenses in check, monitoring your cash flow, and for making well-informed decisions on your road to even greater successes in 2024.
If you need assistance creating a complete budget that will meet the needs of your business in the new year, Momentum Tax would love to partner with you to get the job done. Contact us today to discuss what we can do for you. We can’t wait to hear from you!