Why is it important for your business to have a budget? Business Advisor, Ryan Pistola explains some of the key reasons below.
As a business owner, you’ve surely often heard that you need to have a budget. But then the day-to-day happens, you’re too busy and you run out of time. So why is it so important to have a budget for your business? Here’s why:
- Defining goals
Budgeting forces you to sit down and determine your revenue and profit targets for each of the following 12 months. Usually, this is based on an analysis of historical income and expense trends and then adjusting for things such as planned revenue growth and inflation. This can provide you and your team with a vision to work towards.
- Benchmarking performance
Once you have set a budget, you will be able to track the actual performance of your business each month in comparison to the performance goals you set. This will enable you to periodically review where you are at and make strategic decisions required to stay on track, rather than wait until the end of the year to review how you performed.
- Making decisions
By estimating where your business will be in the future, you will be able to stay in control of your finances and ensure that you can fund your current commitments along with any future ones. This will help you to determine whether you can afford to hire that new staff member, purchase that new piece of equipment, or invest in a new piece of technology.
- Planning ahead
By preparing a budget, you will be able to identify in advance any potential issues, such as cash flow or staffing, which could occur in the future and prepare to address them ahead of time. This is especially important for businesses experiencing seasonal trends, as they can identify periods in which they will need to keep a little extra cash handy to keep things running or employ more staff to cater for increased demand.
Essentially, setting a budget helps you plan your year, keeps you accountable and helps with reviewing the business’ performance. Can you afford not to have one?
For more information or assistance with preparing a budget, feel free to contact our office on email@example.com or (08) 8172 1444.