December 18, 2018
Have you Dropped the Ball on Budgeting & Planning?
While most agree that budgets are wrong the minute they are completed, it’s a recurring new year’s resolution to budget and plan, better. In a last year’s survey, 64 percent of respondents cite that their companies go over budget at least sometimes. Some small businesses may not budget at all, and often ask, ‘what’s the ROI on the process?’ If you haven’t budgeted and planned before the big balls drops… you may find this blog helpful.
Year-end planning has many levels that need important evaluation this month.
- Cash flow analysis and improvement
- Budgeting for 2019
- Considerations for creating a budget
1. Cash Flow Analysis and Improvement
Cash flow analysis and improvement is primary when wrapping up a year-end. It’s the best way to see where you have been and where to make needed changes.
First and foremost, create collection policies and establish your process and stick to it. Have a process for reviewing invoices 30, 60, and 90 days past due. Encourage discounts for paying within 2 weeks. Be sure your invoices are issued in a timely manner and are itemized and easy to understand. Be sure to include your business name, links for online payment and contact information for invoice questions. Should a client become past due, keep detailed records of all communication. If collection efforts fail, consider a collection agency or submit your complaint to your local magistrate in an attempt to settle the outstanding invoices.
Another improvement to cash flow is to choose the best customers to partner with. Although it may difficult or scary to reject business, select customers who value what you do, who value you and your staff, and are profitable. It is also important to choose to partner with selected vendors who are also interested in seeing you and your business succeed. Ask for special payment terms and discounts for your long-term loyalty and early or immediate payment of their invoices. The answer is always no until you ask.
In addition to traditional cash, check, or charge, you may want to consider crypto payments to your offerings. Some major companies accepting crypto are Overstock.com, Subway, Expedia, PayPal, Intuit and Microsoft. With an increase in crypto investors, there has been increased commerce with this new form of supposed secure and encrypted payment method.
2. Creating 2019 Budget in the Fourth Quarter is a springboard to success.
Creating a budgeting process is the most effective way to keep your business and its finances on track. Successful businesses invest time to create and manage budgets, prepare and review business plans and regularly monitor finance and performance.
This will enable you to focus your resources on improving profits, reducing costs and increasing returns on investment.
This process doesn’t need to be difficult or time-consuming. It will create the focus for the direction and of your business and provide targets for business growth by having financial information to base decisions, clarity, and focus.
Your Annual Budget in Plan should include:
- Changes you want to make to your business, changes in market, customers, competition
- Objectives and goals for the year
- Any issues or problems
- Your financial performance/forecasts
- Details of investment in the business
3. Considerations in creating a budget include:
- What are the projected sales for the budget period? Be realistic
- What are the direct costs of sales – i.e. costs of materials, components or subcontractors to make the product or supply the service?
- What are the fixed costs or overheads?
- cost of premises, including rent, municipal taxes, and service charges
- staff costs –e.g. wages, benefits
- utilities – e.g. heating, lighting, telephone
- printing, postage, and stationery
- vehicle expenses
- equipment costs
- advertising and promotion
- travel and subsistence expenses
- legal and professional costs, including insurance
- Use your budget to measure performance
- Review your budget regularly – Actual income and actual expenditures
A hot button item for many 2019 budgets is the inclusion of upgrades to technology, cybersecurity, and automation.
For additional Tax Planning tips Click this link to read our year-end newsletter. Please contact us to make a year-end tax plan. We want your business to grow in the New Year.