First, full disclosure: as a chartered accountant, you would fully expect me to tell you that your business needs a budget plan!
But what you might not expect me to say is that budget planning is a bit like gazing into a crystal ball.
That’s because, done properly, your humble budget plan will help you identify future business issues, create scope for growth, and solve problems before they happen.
What is a business budget plan?
Essentially, a business budget plan provides you with key information about your capital, revenue, and expenditure over a specific period of time (weekly, monthly, or annually).
Some of the factors you will include in a typical business budget plan are fixed and one-off costs, variable expenses, profit calculation, and an estimation of future sales.
Exactly how will a budget plan help my business?
Whether you’re just starting out or have been in business for years, a clear budget plan will work hard on your behalf. Here are some examples of how.
- Sharper decision-making. With a clear picture of your business finances, you can make better decisions about how, where, and when to spend money.
- Help achieve business funding. Banks and investors are likely to ask for information that shows you have forecasted your business spending, and that you understand how their investment will be used.
- Efficient tax-planning. If you are able to calculate your likely business income, you may also be able to take advantage of relevant tax legislation.
- Identify ‘problem’ areas. A budget plan can shed light on your most draining expenses, and stop you from spending money in the wrong places.
- Clear target-setting. You can use your budget plan to help you set and proritise realistic targets for sales and expenses (this is my favourite benefit, and the main reason why I have a budget plan for my own business).
A short case study
To provide a real-world example of ways in which budget-planning can help, I recently worked with a small business owner whose increased workload meant she was considering taking on her first employee.
We worked together on a budget plan that evaluated the initial impact of the hire (extra cost to the business) alongside the new level of income she would need her business to achieve in order to absorb it.
Then, we used the budget plan to help identify new ways for her to potentially increase profits, and how she could shift her own role in the business to achieve the growth she wanted.
“But I haven’t got time to start a budget plan!”
Far from being a one-off task, a business budget plan must be regularly reviewed and updated to make sure it still works with your business needs, and properly reflects any market changes.
So it’s not surprising that along with not knowing how to start, lack of time is one of the most common excuses I hear from business owners.
But while starting a budget plan from scratch might be a little time-consuming, once you have one in place it will be easier and quicker to maintain.
And as we have explored above, the benefits of a budget plan are numerous, so you’re unlikely to regret the time you spend creating one!
If you have any questions about how to get started with your own business budget plan – or indeed, if you’d like some qualified, hands-on help – please contact me to arrange a complimentary Discovery Call.
