Phew! That’s EOFY out of the way for another year. However, that doesn’t mean you can sit back and rest on your laurels. For all businesses, now is an important time to plan for the year ahead and to put things in place so that your business can thrive over the next 12 months.
Budgeting and forecasting are two key tools for business growth and mastering these will have your business well placed to take on any challenges in the coming year.
Not sure of what budgets and forecasts entail? Our quick guide will give you all you need to know to start making some decisions about where your business is headed. And, of course, if there is any aspect of which you’re unsure, The Financial Foreman is here to help.
What’s the difference between a budget and a forecast?
Simply put, a budget is your Profit and Loss target and what’s required to help you meet your goals for the business. A forecast, however, tends to provide a high-level overview of where your business is expected to be in the coming months. This is done by tracking cash movements and knowing when your invoices, suppliers, super, and your BAS is paid.
Why they’re essential to your business
Budgets are important because they measure how you are tracking to achieving your goals and, importantly, if you’re not hitting your budget. And if you’re not, what you need to adjust within your business to get back on track?
Forecasts are vital in ensuring that you’re not running out of cash to keep the business running; you can have a profitable business without having the cash in the bank. But what good is a profitable business if your debtors (money owed to you) balance is huge and you haven’t got the cash to pay suppliers, employees, or rent? Forecasts help you identify a cash shortfall ahead of time instead of being reactionary.
Stick to your guns — have a clear set of goals
Goals should be a stretch for your business. If you’re hitting your goals easily then you’re probably coasting and can afford to push yourself a little bit more. Keep your goals or KPIs to only a few, so they’re manageable and easy to track. That way, you don’t lose focus.
It’s a team effort
Make sure you let others know what you’re hoping to achieve in the coming financial year. Clear communication with other decision makers, be they in your business or external partners like your accountant, will have everyone on the same page and keep you accountable. Remember, you aren’t in business alone; it can be other staff or family, but they should know where you want to take the business and the targets that everyone needs to focus on to help the business get there.
Keep it flexible — adapt as your business changes/events unfold throughout the year
The unpredictability and uncertainty right across the globe at the moment is something that no-one predicted. Because business is rapidly changing, literally on a daily basis, as COVID affects our community, you will need to adapt to changes as the year rolls on. If you don’t, your business will suffer, so roll with the punches and keep making progress.
Plan for various scenarios — think about the ‘what ifs’
This is where an organised banking/budgeting system can help. By thinking about the ‘what ifs’ and planning for contingencies your business can be prepared for any emergencies or take advantage of an opportunity. Naturally, if you need assistance we are more than happy to spend time with you to help you set this up.
Keep track with the right software
If you’re a dinosaur and still using an Excel spreadsheet to do your accounts, stop it!
There are incredible cloud-based accounting systems available for all areas of finance that will save you a bucket-load of time and stop you from tearing your hair out. Likewise, there are people who can either teach you how to use it effectively or, better still, do it for you.
It’s vitally important to have your job management software and accounting software up to date. When you’re making decisions that impact the future direction of your business you want to back those decisions with real-time info and not a gut feel.
Review and adjust — your accountant is your friend
Your relationship with your accountant is key. A collaborative approach with your numbers guy to dive into the figures, help remove roadblocks, unlock potential, and increase profitability will ensure your business stays on track. A good accountant (like The Financial Foreman) will help you get the best out of your business and keep you on the path to achieving your goals.
Three tips from The Financial Foreman
- Set a budget for the next financial year.
- Keep a keen eye on your cashflow. This will ensure your business forecast is on track.
- If you’re not sure you’re up to tackling budgets and forecasts for your business, don’t panic. Your accountant can help you plan for the next 12 months and the future.
Call Josh at The Financial Foreman on (08) 7129 4433 and set up an appointment to arrange an appointment to talk about how budgeting and forecasting can play a significant role in the future of your business.