Having a clear budget plan laid out for your business is essential for planning ahead. It helps you to see how you’re performing and allows for risk aversion. Business budget planning will help you to look at all your income and expenditure. This allows you to tweak things to avoid potential cash flow issues, particularly following the recent covid-19 outbreak. This is especially useful when you need to make unexpected changes.
Looking at your business expenses, you should list your fixed costs and your variables. Fixed expenses may include things like rent and utilities, insurance and payroll. Variables can change depending on your business activity, or external factors. These include marketing costs, raw materials and repairs.
Next look at your income and your profits. The best way to do this is by looking at actual sales, but if you are just starting out, it’s important that you do your market research and look at competitors.
After this you will be left with your projected cashflow. This should be compared month on month with your actual revenue to show if you are on target and if you need to make any adjustments.
In our last post, we looked at Why your Business Needs Accountancy Advice, and business budget planning is another area accountants can help you in. We can assist you to draft your budget using recent financial statements, if you are already operating. If you’re starting out we will use realistic estimates to create a plan that is as accurate as possible.
There are many things that can vary unexpectantly like losing or gaining clients, increases in rent or even something as unforeseen as the current lockdown for covid-19. This is why planning ahead is so important. Tracking your business budget allows you to see, at a glance, what areas of your finances can be tweaked and what areas are already stretched.
In a situation like we are in at the moment, it may be necessary to cut back on unnecessary spending. Look at ways you can reduce utility costs or supply costs. Any savings you can make can then be projected into your budget planning to see how this will impact your finances as a whole. There is further advice available on gov.uk on support available to businesses at this time.