Never Underestimate the Value of a Budget
If you haven’t determined a clear path to your business’ success, how will you stay on the right path during challenging times?
If you don’t know where you want your business to be in one year, five years, or ten years, will you still be in business at those benchmarks? In today’s uncertain environment, it is not enough to simply record income and expenses; you need to develop a road map, a budget, to help you carry out your business’ objectives and strategies in a manner that is measurable and makes sense to you.
A budget is both a target and a tool. Your budget is a target in that it is a plan of action for achieving desired results by estimating income and expenses for some period of time, usually your fiscal year. It is based on both past results and future forecasts.
For example, an expensive piece of equipment that is essential to your business suddenly needs replacement. How do you determine the best way to proceed? Assess your liquid cash – how much do you have on hand, and how much of it is earmarked to be expended (e.g. upcoming payroll taxes). What are your projected expenses and income over the next 30, 60, 90 days? Have you billed all past and current work? If not, that is income waiting to come in. Having a clear budget in place and knowing exactly where your business stands financially, will help keep you on target when faced with a sudden shift in expenses or income.
Your budget is also a tool. It is a standard for measuring results by comparing actual income and expenses against your estimates. And your budget can help you control costs and maintain certain ratios or put limits on spending categories. For example, you might determine advertising is not to exceed 10 percent of sales. Now you can project available advertising dollars based upon your budgeted sales figures. A budget will allow you to strategize and keep expenses in line.
At Solid Rock Accounting, we can help you know where you are going and help you get there by working with you to develop a workable budget that makes sense to you and your business. For more information on the packages and services we offer, please visit our website www.solidrockaccounting.com.