5 Key Reasons your Business needs to Budget
If you are asking the question, why does my Business need to budget? There will be many reasons why.
The 5 reasons below will get you asking the question: Why does my Business not have a budget?
Every business should have a budget as a starting point.
So what is a Budget?
It is essentially a plan of how you think your business will perform.
It also needs to be realistic. In an ideal world, we would all like to have continual increasing sales, lower costs and increased profits. But you need to be realistic when it comes to setting your Budget.
By all means have ambitions, goals and targets. This falls into the key reasons for having a budget in the first place. It will keep you focused and give you the tools to help you drive your business forward.
1. It gives you something to focus on
Having a budget gives you targets to work towards and will help drive your performance in the business. It will also help you to decide which areas of the business require more attention.
Whether this would be sales falling below budget or costs that are coming in higher than budget. You would which area of the business currently requires more focus.
2. It will help you to feel in control of the business
You are in control. Having a budget to work towards will help you keep in control of the costs coming in and out of the business.
It will keep you more disciplined and push you in the direction of ‘doing something different’.
Taking a step out of your comfort zone and the mindset that is too often adopted of ‘that’s the way it has always been done’.
That doesn’t always mean that it is the best way. Having a budget will make you want to look for better alternatives.
You might want to shop around for suppliers to get a better deal, rather than just using the one you have always used.
3. It can help with making key business decisions
Having a budget allows you to see when would be the best point in time to make key business decisions.
If you are thinking about investing within the business over the next few months, by having a budget you can easily see when would be the right time to do this from a financial point of view.
It will also give you more confidence when making such important decisions. You have key financial information that will back up any important decisions that need to be made.
4. It can avoid you from getting into debt
Your budget will allow you to easily see what payments you have outgoing, versus what you have incoming.
If the outflow is more than the inflow you would be able to plan for this before the event actually happened.
You will easily be able to see when your business will be in a more favourable cash position.
5. It can help you plan for the future
Knowing what will be happening to your business from a financial point of view can only be a good thing to help plan the future of your business. Having all the financial information and data readily available can help you look to the future and make plans in the long term for your business.
Budgeting in your business will help you keep focused and driven into achieving the targets set by your budget.
It will help you keep in control of your business from a financial point of view, helping you to make key business decisions at the right time.
A budget will help keep you from getting into debt and can be a great tool to help you plan for your future.
Your Next Steps?
We all know things can change that are sometimes out of our control, which would mean the original budget that has been set can become out of date and unrealistic.
That is where re-forecasting, scenario building and planning would come into play, alongside your budget.
Here at Northern Accountants, we have a specially dedicated team who can help you with making those steps to set an accurate and realistic budget.
The past is the past, it’s time to start looking into the future and make your business the best it can be.
Read about how you can manage your cash flow with Float, here.