Budgeting is a natural part of running a business. Although you can generally pin down what expenses you need and how much income you have to allocate for these, it can feel overwhelming when you don’t have the right pillars to keep your budgeting grounded.
The best financial advisors will not only guide you with the numbers but also likely help you adhere to some core factors that should dictate your business budgeting. Here are some of the main ones to consider:
1. Industry Risks and Regulations
Before you decide how much to budget, you need to take risks into consideration. Different industries have various risks that will come into play when considering what you need to budget and prepare for. For example, in construction, there is the possibility of inclement weather during the winter season that could delay your project’s schedule.
Certain industries also require you to work on a project-based basis. This will help you determine whether you need to map out a quarterly budget or even shorten this down to a monthly approach.
Aside from risks, you also need to think about the regulations that apply to your industry. These will dictate the taxes and fees that you need to financially prepare for.
2. Identifying the Kind of Budget You Are Making
Before you even start calculating and itemising everything, it’s best to figure out what kind of budget you are making. This will help you streamline the process and figure out your financial objectives with more clarity.
The two main types of budgets are cash flow and accrual net income. Both of these budgets use different forecasting models and yield different results.
If you are budgeting based on cash flow, you are accounting for your profits and losses to ensure that you are maintaining a sustainable amount of money going in and out of the business.
As for accrual basis and net income, you look at the income and expenses of the business, and regardless of cash flow, allots an amount to pay for expenses.
3. Available Management Resources
Aside from looking at the core services you offer, you also need to consider the type of management resources you have available. An essential aspect of smooth budgeting is having the right team to handle your finances.
Financial experts can give you proper budget advice, and employees can help execute the necessary steps to get things in motion and use the budget as intended. It’s usually best to have a select team for management that you can trust and rely on.
4. Financial Results
You want to have a basis for your budget plan. Look at past results in your financial activity to see what adjustments need to be made. If you have no previous data to use as a basis, you should do some market research to have a more informed estimation of what you will need to budget for.
Keep track of your financial results so that your budget can really be optimised. You also want to make sure that you are grounding your budget on realistic expectations so that you don’t overestimate things or not have enough allocation for certain expenditures.
Conclusion
Budgeting is a necessary tool for a business to keep its operations running. While it may feel like a chore that gets overwhelming, having the right pillars can make it a means to thrive.
New Wave Financial Planning embraces the best technologies to tailor advice for each and every client. Connect with us to find your own financial advisor on the Gold Coast.
