Campbell Tyson Blog

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Do you have a budget for this next financial year?

We often find that for many small to medium sized businesses the answer is no.Many small business owners get so tied up at the coal face, and as a result fail to plan for the future while dealing with the present.The process of putting together an expectation for the year can be daunting especially if you don’t know where to start.

Why Budget

A budget is an important start in the business planning process.Without a budget you cannot effectively plan for your businesses future.

Some areas where budgeting can help include:

Cost Savings

By budgeting your costs at the start of the year you get the opportunity to review your expenses and consider potential savings.It is often amazing what you could save by reviewing your standard service contracts on a regular basis. Are you spending money on stuff you don’t actually need?

Manage Cashflow

Going through a budgeting process also allows you identify potential cashflow issues that may crop up during the year.If you become aware of a ‘cashflow hole’ you can take steps will in advance to mitigate the problem.This can include trying to increase sales on those months or talking to your banker early in the peace for financing solutions.Banks are always much more receptive when given advance warning.

Keep on Top of Tax Payments

If you have a good idea of what your income will look like over the coming year you will be able to more accurately plan for your tax payments.

Budget Process

Preparing a budget doesn’t have to be a long drawn out, time consuming or expensive task.Here are few simple steps to help you get started.

  1. Start off by looking at your previous year’s actual sales and costs on a monthly basis.
  2. Review your previous year’s costs on a ‘line by line’ basis.For example purchases, phone, power, rent, wages,insurance, vehicle costs etc.For each expense line, consider what you think the cost would be for the coming year.At the same time it would be a good idea to look at areas where you could save money.Remember that some costs, like purchases and wages, may vary depending on your income.
  3. Review your income and think about:
     - Changes in market & economic conditions
     - Is your income seasonal
     - What level of growth do you want & what will be required to achieve it
     - If you want to grow your income, will there be any lead time before you see any increased cash
     - What costs are linked to your income.For example will your purchases go up or do you need to hire a new staff member
  4. Consider loan repayments and alsothe drawings you need to take out of the business to survive.

How Can We Help

If you find the process just that little bit too daunting we can help with everything from reviewing your budget to completing the whole process for you. 

Give us a call if you would like a hand with preparing your budget.

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Guest Sunday, 22 October 2017