Start the New Financial Year by building a Business Budget
A new financial year is like springtime for your company. There are numerous opportunities to revitalize established procedures and ways of thinking. We adore this time of year for making new year's resolutions. Much better than fighting the post-summer vacation blues in January.
Setting a business budget is a simple method to start making substantial improvements. Although it may appear to be a daunting endeavour, a well-planned budget is the key to excellent financial health.
Stells takes a different approach to budgeting: she creates a budget from the ground up. Begin by establishing how much profit you want to make. Then, go over all of your expenses and search for ways to cut costs. Your goal revenue is calculated by adding your target profit to all business costs. Bottom-line profit should be the driving force behind top-line revenue.
For example, suppose you intend to achieve a net profit of $60,000 this year. Your running expenditures are $150,000, and your direct costs are around $230,000. To make this profit, your annual revenue must be $440,000.
Here are four basic stages for creating a company budget:
Step 1: Calculate Net Profit
Determine how much profit you want to make in the following 12 months (after paying yourself a salary).
Step 2: Operating Expenses
Examine each running expenditure, such as automobile registration, phone and internet service, and insurance. What may be decreased, eliminated, or renegotiated? Small adjustments to business spending may have a major impact.
Step 3: Direct Expenses
Wages and freight are examples of direct expenditures that contribute to the creation or sale of your product or service. It is more difficult to cut direct expenditures but seek for cost-cutting solutions.
Step 4: Add Net Profit + Operating Expenses + Direct Expenses to reach your Target Revenue.
Break this desired revenue down by month (consider any seasonal adjustments).
Now comes the exciting part. Does this income aim achievable? Begin by confirming the number using historical data. What were your income goals a year ago? Can you meet this year's goal?
Strategic planning is facilitated by the process of developing a corporate budget. How are you going to meet the revenue target in order to make a profit? Do you have the resources in your team to meet this income goal? Is it necessary to revise your pricing?
Will you require more revenue streams? The start of a new fiscal year is an excellent opportunity to establish certain goals and key performance indicators (KPIs).
We think that every company should have a budget. If you'd want us to assist you with creating a company budget, please contact us at (07) 3804 7575 or firstname.lastname@example.org.