Is your business in growth mode?
Over the years, we’ve heard from too many business owners that their budget is in their head. And that may work for some in the beginning — as long as you’re not looking to grow.
As your business expands, there’s a spend against revenue. If you grow by $500,000 or a million, for example, you may need to hire more employees — so you’re going to spend more dollars. A monthly budget will help you figure out how much you can spend to still achieve your revenue goals.
And what business can’t benefit from that?
Beyond crunching the numbers
At Magone & Company, we recommend that most business owners have two to three different budgets:
- Internal planned budget
- Overachievement budget
- And a budget that considers negative outcomes
Your planned budget is the one you’ll present to banks and investors when looking for financing opportunities. The other types are used when analyzing trends for the year.
As you’re forecasting trends, involve your sales team to speak with customers to gather input. What will your customers buy? How much will they spend? You can also refer to previous forecasts and estimate sales based on past purchase orders. For example, if you had purchase orders for $2 million in sales, but your overall sales for the year were $2.75 million, you can budget 35% of sales will be unplanned by your customer base.
All hands on deck
Budgeting involves more than your sales department — from your inventory team to HR to marketing and more:
- Is there enough warehouse space?
- Do you have a team of employees to carry out the projection?
- Did customers indicate they’ll buy the same quantities?
- Are customers looking for a price reduction?
Once the budget is complete, you’ll need a consistent close process to produce the actual results and analyze variances, so you can make changes to your headcount, pricing or other factors. Remember, as a business owner, you want to have the ability to change strategy and still achieve results.
Take control of your business growth
In celebration of our 30th year in business, we’re rolling out a series of educational videos to help busy executives, families and business owners meet their accounting and tax needs and achieve their financial goals.
Check out the latest on our YouTube channel, or call us at (973) 301-2300 for help setting up a business budget.