Business budgets and cashflow forecasts are only for the bank, right? It’s just accounting jargon that doesn’t really have anything to do with the day-to-day running of your business, right? Wrong!
As accountants we do like talking about business budgets and cashflow forecasts – guilty as charged! But what many small business owners may not realise is that they can (and should) be used as tools for success.
A business budget and cashflow forecast for the next 12 months can be a very valuable tool even with the unknowns of the COVID era, the lockdowns, supply shortages, shipping issues etc. Creating a budget at the beginning of a financial year can show you where reductions can be made in your business expenses, what level of revenue you require for the year to cover your outgoings and ensure you, as the business owner, have enough profit left over to compensate you for all your hard work and the stress that goes along with running a business.
Budgets and cashflow forecasts can be even more valuable in times of COVID lockdowns and restrictions, as you can track lost sales that need to be made up over the rest of the year, and easily see the breakdown of your monthly expenses to make cutbacks, if required. This information can help you to successfully navigate unexpected challenges and play a key role in helping your business to survive.
Knowing the direction your business is headed in enables you to make informed decisions. If you are leaving on a trip, you would look at a map and plan your journey, so you know where you are going and how you are going to get there. A business budget and cashflow forecast is like a financial map of where your business is headed. There may be some detours along the way and your destination may need to change, but if you don’t have a map, how can you be sure where you are going or even if you are heading in the right direction?
Knowledge is power. When you know your year-end goal and how you are tracking, only then can you be prepared to tackle the obstacles that COVID and other unexpected situations throw at you.
As experienced Chartered Accountants, we can work with you to prepare a realistic business budget and cashflow forecast for your day-to-day running activities and help you keep track of your actual results compared to your budget during the year.
Erin Gibson is a Director at UHY Haines Norton and loves helping clients to understand their financials and plan for the future. She can be contacted on (09) 973-0700 or email email@example.com.