Budgeting
We provide full budgeting options for clients concerned about managing their growth and cash flow. The best way to create your budgets is to:
- Start with your business plan, work out what your business is trying to achieve and how it needs to operate to achieve those goals
- We take the big picture roadmap in your business plan and break it down into baby steps so we can develop short term goals
- Using those short term goals we create KPIs (Key Performance Indicators) which we can track in a budget such as growth in turnover, profit growth, asset purchases and staff expansion.
- We then use these figures plus your historical figures (and relevant percentage calculations) to draw up a profit budget and a cash flow budget.
See below a very simple example looking at a profit target only just designed to help you understand the process:
- From discussing your plans for the future we know that your business has a 12 month KPI to increase sales by 30%
- We look at historical figures and work out that your new sales happen in only nine months of the year not twelve months (December, January & June are pretty dead months for winning new clients in this fictitious business)
- So we know that to hit this budget we need to actually increase sales by 40% in the nine months where you are likely to win new clients to hit an annual target of 30% – so we now have our monthly Sales KPIs for the monthly budget (in fact you can often be far more detailed than this in what months are best/worst for your particular business)
- By identifying your fixed versus variable costs we map our the business costs that would occur if you hit your new targets and when they would occur
- And now we have a month by month budget showing what you need to achieve each month of the year in order to achieve your annual targets
Obviously actual budgets have far more than one variable and tend to be organic documents that we continually change on an ongoing basis. Keep in mind this does not all need to be done manually! For example, for cash flow budgeting we often use Float which is an add on product that links directly to Xero and when setup correctly can help you forecast your cash position over time.
