A budget is vital for any company irrespective of the size. A budget is a financial plan that helps to carry out an organisation’s objectives and strategies. As the English proverb says: Those who fail to plan, plan to fail.
Creating a budget suitable for your business will help you forecast income and expenditure and allow you to compare your anticipated financial goals with the actual numbers. Essentially, budgeting is a means to monitor business performance and is used as a tool for decision making. Knowing how much money can be spent and on what is the most important factor for a small business to stay afloat.
There is no ‘right way’ to create a budget. It can be created in a way that is comfortable and easy to understand for you. Decide if you will be creating a monthly, quarterly or even a yearly budget. Budgeting software is available for you to make creating a budget a clean and effective process.
Budgets have three main benefits:
1. Limits Expenditure
Having a business budget set out will limit how much money is spent on certain expenses. The budget will have an allocated amount for each expense for the period which will monitor progress and make sure money is not being wasted on unessential items and that the company is not overpaying for economic resources. The budget will also help you examine how much you are paying your suppliers and whether or not these suppliers need to be reviewed.
2. Creates a Financial Road Map
A budget acts as a ‘financial roadmap’ for business operations. Many companies review their previous year’s budget to determine how they will plan for the coming time period. By reviewing last year’s budget, you can analyse each account and see why budget variances occurred. It is important to consider the current economic conditions when planning your budget.
3. Helps you plan for future growth
Budgets are a great way to plan for expansion and future business growth. Capital saved on business expenditure may be placed in a reserve account. Budgeting for future opportunities will ensure that your company has capital on hand to make fast decisions. The capital may also be used as a safety net during times of economic downturn.
The Quinn Group has a team of dedicated and experienced accountants that can assist you in implementing a budget for your small business. Contact us on 1300 QUINNS (784 667) to book an appointment or submit an online enquiry.