What is all this talk about budgets? Why do I need to do a budget you might ask? I might say where do you want to end up? Stop, after all, with no budget and goals to strive for why are you in business in the first place?
1. Why Do a Budget
a. A budget lets you set financial goals and targets from which to implement SMART goals for your team’s achievement of them.
b. It provides a reporting base to run against and helps capture any irregularities quickly while also providing a roadmap for transition back to plan.
c. A well done detailed budget will uncover some of the KPI’s (Key Performance Indicators) that are relevant to your business profit.
d. It provides all the financial reports for running your business and that banks requests, i.e., P&L, balance sheet and cash flow.
2. When do a Budget
a. At a minimum, a budget should be done on an annual basis each year fiscal year. You need to give yourself enough time for this task (6 -8 weeks) so for a calendar year business plan on starting in November.
b. Budgets should be reviewed at least on a monthly basis (weekly in many cases) vs actual expenses to adjust to market conditions and react accordingly.\
c. All size companies should be doing a budget, especially a startup company. Cash is still king. You need to understand your cash flow and how long it will last! This has been the downfall of many small businesses. Know your numbers, especially cash flow.
3. Who Does A Budget
a. Ideally the person responsible for the budget would submit it for approval. In smaller companies, the owner or CFO role would complete this task.|
b. Ok, I have never done a budget, where do I start? Use the STOP formula.
i. S = Sales
1. Budget for expected revenue, how – what mechanism and by whom.
ii. T = Tangibles
1. Other balance sheet items
2. Fixed asset purchases – computers
3. Bank loans
iii. O – outgoing
1. Money going out
a. Phone, Rent, Travel, ETC.
iv. P – People
1. Budget the expense of people
a. Gross payroll, Taxes ,Benefits
Need help with your budget or have any questions, please feel free to call me at (330) 348-3932 or email email@example.com