Harness the power of a financial budget to improve your accounting practices
Running a business without having a financial budget, is like doing a 10km trail run blindfolded. It's not going to be pretty...Follow the advice of expert accountants, to create a simple financial budget that'll make your accounting practices more professional and more effective.
Here's what the team at the Practical Accountancy Loose Leaf
advise you do when it comes to creating a financial budget.
Follow these three steps to create a financial budget for your business
Step # 1: Start your financial budget based on assumptions
These assumptions start with your strategic goals and plans. An assumption could be that you're planning to open a new branch of your business in another province, or that you expect an increase in the cost of electricity.
Your assumptions can be factors under your control (e.g. salary increases for next year will be 7%) or out of your control and dependant on external factors (e.g. the average exchange rate next year will be R 9.00/USD)
Step#2: Coordinate your financial budget with your strategic goals and other considerations
For example, ask what else you can do to achieve the objectives.
Step#3: Control your financial budget
To make your financial budget useful, break it into manageable pieces, such as smaller monthly or weekly financial budgets. You can compare this with your annual budget, to see where variances occur, and why. Based on information from your investigation, you must now react! Your reaction could be to revise the budget.
If you haven't already got a sound financial budget in place, what are you waiting for? Get started today, and see how your business can benefit.