You may recall our column from the 6th of December, where I presented three tips for a better business budget in 2012. In case you missed it, they were – know why you’re budgeting and what the benefits are, know how you’re budgeting (and get help if you need it!), and use your budget to help plan growth and capacity expansion.
This week we bring you the final three tips:
1. Compare your business to industry benchmarks.
Used wisely, benchmarks can give you some information regarding the operation of a typical business in your industry, and these are usually easy to access. Knowing what similar businesses expect in expenses and income is a big help in budgeting. However, no two businesses are the same, so don’t blindly assume that because your business is different, there is something wrong.
As an aside, the ATO’s use of benchmarks as a means of identifying reluctant taxpayers is being questioned because (surprise surprise) their benchmarks are totally unrealistic.
2. Use some cool tools.
The actual mechanics of creating a budget can be a bit painful, but these days there are some excellent computerised systems available to make the process easier. The simplest tool is one that’s installed on many computers – Excel. The mighty spreadsheet (much-adored by accountants) is a great starting point, and you don’t even have to be an Excel guru – there are many templates available online to get you started.
For more complex businesses, you may need to use more specialised software – if you would like some guidance, feel free to email us at morethannumbers@jandt.com.au.
3. Keep on updating.
As I stated a few weeks ago, the real value of a budget is that it provides a dynamic view of your company. If you create a budget and don’t update it at least quarterly, this view will become cloudy at best, and possibly downright misleading. This means you need to compare the results for the previous three months with your budget – and consider why any differences occurred – and then adjust the forecasts accordingly.
It’s a simple and logical process, but budgeting is often forgotten in the excitement of running a business. If you don’t have a business budget (or a personal one, for that matter), why not use the down-time over the Christmas season to create one?
Happy budgeting and Merry Christmas!
