Was this you? What if something like this were to happen again?
Not having a plan result in a feeling of anxiety and stress levels soar, which is a situation I believe is not fair to any business owner. Do you agree?
The simplest plan I’m referring to here is a financial plan, simply called a budget!
So, what’s a budget and how can you create one?
- A budget is a simple way to keep track of how much sales your business is expected to make and how much you expect to spend, usually over a period of a month up to a period of 12 months.
- From the budget, you can create a cash flow budget that will convert the sales to give you an idea of the cash received from those sales versus the cash paid for your expenses. This is important as some businesses sell on credit and have credit terms with suppliers. Knowing how and when the cash is coming in and going out is critical to how your business survives and thrives.
- Setting out a realistic estimate of your sales and expenses gives you a picture of what you can improve on and what you need to cut down on. For example, you may find that your sales are not even to cover your expenses in general or in a particular month/season. Seeing this laid out in black and white can help you re-arrange your cash flow, make alternate arrangements, have conversations with your suppliers about payment terms.
- Reviewing the current cash flow in your business can assist you in identifying problems. Problems to look out for can include customers who have not paid you for a long time and taxes that might be coming due soon. Other problems that can affect your cash flow is competition as well as your own sickness/disability.
- The budget you create also motivates you if you set achievable targets for yourself and your team to achieve within a set period. When you compare your actual results with your budget, you can pick up reasons why you did well or did not fare well and the most important part is that you are now making an informed decision about the steps to take to ensure that you and your teamwork towards meeting and even exceeding the budget.
- Last, but certainly not the least reason for budgeting is to avoid that sinking feeling in our gut when we know that we should have had some spare cash set aside for those unplanned emergencies. In my favourite quote from Warren Buffet, he says that you should spend after you’ve saved. To that end, my advice is to include saving in your cash flow budget each month! Yes! Just as you would budget to pay the electricity bill each month, you should be just as intentional to set money aside for those unplanned eventualities.
We work with our clients to help them prepare their own realistic budgets and we can do this for you too. Not only that, we also help them by taking care of the bookkeeping for them, so that we can have even more meaningful conversations with them about their business.
Let us create a step-by-step plan so that you can have peace of mind and clarity of direction when it comes to your business.
