As promised last week, this week we discuss Financial Planning, which has another name that we are all more familiar with, a BUDGET. A budget can be any size, for any purpose, from the Finance Minister’s budget for the country to the budget for your daughter’s birthday party. Any business, no matter what size should have a functional budget.
A budget is a way of ensuring that a limited amount of money is used in an effective way. It helps to ensure that expenditure doesn’t get out of control. We all have nightmare stories of the business project that ran over budget and out of control. Can you imagine how bad it would have been if there was no budget and the consultant or staff didn’t have any target to stay within!
A budget also assists you in knowing how much money you need to find, earn or borrow, to achieve your goal in your business. Once you have the funds, it helps you to stay within your available resources.
Your business budget should the following:
– A specific timeframe – there is a start and end date for a budget, either an event, a year, a month, a project.
– Be forward focused – a budget never deals with the past, only the future
– Detail income as well as costs – you need to know where the money is coming from to pay for the costs, this can be as detailed as necessary.
When preparing your budget for next year here are a few things to consider:
– What activities will be involved?
– What resources will be needed to perform these activities?
– What will these resources cost?
– Who will complete the activities – staff, out-sourced personnel, volunteers?
– Where will the activities occurrent for your premises, or hire a venue, or outdoors?
– What are your existing commitments – contracts and non-negotiables?
– How do these anticipated costs compare to the actual payments in the past for the same things?
Remember that your budget will be based on assumptions as the future is uncertain. Make sure you document these assumptions in case circumstances in your business change and the budget can be updated.
Next week, we’ll look at recordkeeping, a vital process for any successful business that helps track spending against your budget.