Why all businesses should budget

With the end of quarter three for the 2018 financial year approaching and having your 2017 financial accounts and tax return finalised (or in the process of), it is time to start thinking about the 2019 Financial Year.

For many businesses the forward thinking will start and stop with tax planning, or no planning at all. However here at Rubiix we believe planning for all aspects of your business is beneficial and one of the most important tools, including tax planning, is preparing a budget for the upcoming year.

The advantages of preparing and complying with a budget can apply to many areas. These include:

• Income estimation: Budgeting sales for the year, not only provides a guide on income and profit levels, it can also provide ways to increase income for the year
• Tracking expenditure: Determining expenditure on a month by month basis, allows a business to track the expenditure through the year. It will also provide an insight on the expenses that can be reduced throughout the year, or highlight where savings can be made.
• Cash flow planning: Cash flow is integral to a business. A budget can not only provide estimated profit, but also can be a guide to the cash flow of the business. A budget can provide guidance on where savings can be made or where further financing will be required.
• Staff performance: Staff performance can be based on the budgeted figures. Key Performance Indicators (KPIs) can be measured when a budget is compared to actual figures. It also can help determine the level of staff required for the year.
• Efficiency reporting:  Budgets can be used to determine estimated ratios that can be used to measure the efficiency of the business. These ratios can be benchmarked against similar industries and previous periods, which can highlight improvements that can be made.
• Variance reporting between budgeted and actual figures: During the year, reports can be produced showing the variance between what actually occurred and the budgeted figures. This variance can then be explained by a number of factors and changes can be made to the remaining year
• Can be used to assist financing: Some financing options require an estimate of the following year. A budget can provide the information that the financers require.

With the use of computerised accounting systems or a simple spreadsheet, the preparation of a budget has never been easier. Budgets should be individualised to each business as no two businesses are the same.

If you would like to discuss the benefits a budget can provide your business or would like assistance in preparing your budget, please contact us. We can also provide expert advice on what planning your business can benefit from in the upcoming year.