Best practice suggests that every business should have a financial budget for each financial year. If the business doesn’t have one then now is the time to prepare one. The first budget that should be prepared is the cash flow budget and profit and loss budget. It includes forecasting sales, expenses and capital requirements.

Gain an understanding of the cost centers and understand the characteristics of each one. We know the constant costs such as rent, insurance wages etc, but what about all the variables?  What impact do they have on cash flow?

The same understanding is needed for sales performance - how are sales performing to expectations. Are there budgets in place for the sales team? What are the direct costs associated with each sale? A key area linked to income is the costing of the marketing plan which measures the return on investment for each initiative. Knowing the numbers here can lead to increasing the marketing efforts into activities that are working and get rid of the ones that are not working.

Planning is essential for business. It is not a “one-off” activity; treat it as an ongoing process. It can provide the business with the overall direction and a summary overview of the way it is likely to operate and an indication of how profitable and viable it is in the market place.

Knowing the numbers will be useful in looking at the assets needed to operate the business, ensuring the business can raise the capital to finance the assets needed. It will also make sure that the business has the funds to meet the commitments as they are due.

It helps the owner know what to look out for and what to control. The owner can make informed decisions based on factual information, not just guesses. Without knowing the numbers we are flying blind.  In summary there are numerous budgeting templates out there so I would suggest talking to your accountant and bank manager.