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Why Should I Have a Business Budget?

Business Budget

We get it – running a small to medium-sized business can be a real whirlwind.

You’re often busy working IN the business, dealing with daily operations, customers, and staff. Adding a business budget to the mix might seem like the last thing you need.

Although this financial management practice may seem reserved for large corporations, it is imperative for businesses of all sizes.

Creating and sticking to a budget is like having a compass for your financial journey. Placing the money strategically will move the current in a way that boosts performance and helps you achieve those big, audacious goals.

Don’t just flow with the economy’s trends and waves that result in a successful business of circumstance. Have a business by design. Use a budget to make the business work for you, not vice versa.

Benefits of a Business Budget

The benefits felt in your specific circumstances may differ. The following are the benefits witnessed across Lift Accounting & Advisory’s 18 years of working with small businesses.

1. Financial Insight

A business budget gives you a roadmap of where your money is coming from and where it’s going. It’s like having a financial GPS that helps you understand your business’s cash flow. This priceless insight lets you make informed decisions, control your finances, and preempt unexpected cash flow disruptions. It gives you more control over your money and where you want it to go.

2. Prioritising Projects

A budget lets you strategically allocate funds to projects and initiatives to align with your business objectives. It helps you meticulously distribute funds and identify priority undertakings. For example, Australia’s $20k asset write-off tax deduction can be a game-changer. With a budget, you can see if you can afford to take advantage of this tax break.

3. Seizing Opportunities

In business, opportunities can knock when you least expect them. Whether it’s a chance to expand, purchase discounted inventory, or hire top talent, a meticulously managed budget enables businesses to exploit opportunities by clearly assessing financial capacity. You’ll know exactly what amount of money you can afford to spend NOW and how to make the most of it.

4. Winning Over Investors and Lenders

A well-thought-out budget is your best friend if you ever plan to seek funding or loans from banks or investors. It demonstrates that you’re a responsible business owner who understands your finances. Therefore significantly reducing perceived risk for prospective investors or lending institutions.

A budget shows that you’re committed to managing your business effectively and can display how long it takes until potential backers receive their money back.

5. Taming Annual Bills

Annual expenses like tax bills, insurance premiums, or license renewals can be daunting when they hit you all at once. A budget helps you set aside money gradually throughout the year so these bills don’t feel like a financial tsunami. They are effectively mitigating the impact of these annual financial obligations.

6. Increase Staff Motivation

A business budget outlining how much is needed to achieve a goal can increase staff motivation to accomplish their targets. Numbers don’t lie. Having a clear intention of where that money is going, whether upgrading equipment or covering increased labour costs, instils trust and includes staff in the budget plan.

7. Benchmarking

Your budget offers an easy way to show performance from year to year. You’ll see costs, revenues, and cash flows at a glance while comparing projected figures with outcomes. Understand your business trajectory at a glance.

8. Paying Off Debt

Removing debt is a major benefit of having a budget. It should include line items for each expense, with the current deficit being just one of them. If a business follows the budget and accounts for the monthly or quarterly debt payments, it should be able to pay the debt off promptly.

9. Plan For The Future

Think of the Budget as a “snapshot” of a company’s medium-to-long-term objectives. It shows you where you are putting your money to achieve the goals you care about. It is a financial plan and a way to show your financial position.

Think of the Budget as a “snapshot” of a company’s medium-to-long-term objectives.

How To Start A Business Budget?

You might think, “That sounds great, but where do I start with a budget?” Well, here’s a basic roadmap to get you going:

Step 1: List all your sources of income and expenses, from rent and utilities to payroll and supplies.

Step 2: Identify your financial goals. What do you want to achieve in the short and long term? You could aim to expand, hire more staff, or increase your savings.

Step 3: Use budgeting software or a good old spreadsheet to determine your monthly expected income and expenses. Be realistic, but remember to be ambitious too!

Step 4: Your budget isn’t set in stone. Regularly compare your financial data to your budgeted numbers and adjust as needed. This is where the real power of budgeting comes in – adaptability.

What A Business Budget Can Do For You?

Having a budget for your small to medium business is like having a secret weapon.

It gives you control over your financial destiny, helps you seize opportunities, impress potential investors and lenders, and makes those intimidating annual bills feel like a walk in the park.

So, roll up your sleeves, get started, and plunge into the business budgeting world. You’ll wonder how you ever managed without it!

Or, if you cannot accommodate one more item on your to-do list, let us do it for you.

Contact Lift Accounting and Advisory to make a business budget that allows you to achieve MORE. Your business can blast off and reach new heights by injecting more rocket fuel in the right places.

Receive tailored budgeting advice at (02) 4344 2460 or email us at office@liftaccounting.au

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