We’ve been working with some smart cookies recently, but they can’t spot the gaps – can you? Watch this to find out!

Transcript:

Hi and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.

We’ve been working with some new Outsourced FD clients recently, four or five different businesses, all of whom are quite established and they’re being run by what we would deem as quite smart cookies. They’re people who’ve owned their businesses for some time and in some cases are on a second or even a third business, so they’ve been around for a while.

They’re not novices, but the surprising thing, a factor between all of them, is that none of them have budgets in place.

So we’ve been working with them, or will be, to make sure that they’ve got clear budgets so that they know exactly what they’re looking to do, where they’re going and how they’re going to fund their plans for the next 12 months.

Having a budget can be such a great thing; it can really make a difference to a business.

Why?

Well, to get to a budget you need to have a very clear idea of what your activity’s going to be.

You need to have that detailed planning session and you need to know where you’re trying to get to. From that, you can work back and chunk that down to work on the budget and start to piece that together.

Once you’ve got it in place a budget shows you where the gaps are so you can see whether you’re overspending or underspending.

Overspending obviously, as we all know, when you overspend, you end up that you don’t have enough money. It causes all sorts of problems and can cause you a lot of stress and a lot of sleepless nights.

What people don’t tend to realize is that underspending can equally be an issue within a business. If you’ve decided you want to go from here to here in a time scale, if you’re not spending in accordance with your budget, then you’re very, very unlikely to get to this end point in accordance with the schedule.

Having a budget encourages focused activity.

So in the same way as if you’ve got your clear goal and you’ve got a deadline, you know that you’re not going to mess about on social media if you’ve got to get this job down by the end of the day, having a budget encourages you to make sure that you’re focused in terms of where your activity’s going. If you’ve got a budget that will get you to this point, you can’t go off in this direction, because the funds just won’t be there to support the budget and to support that goal.

Having a budget if you’ve got a team is really helpful, because it enables you to devolve some responsibility and to create some accountability within other people.

You can set different elements of budget to different people and different managers or just different people within your team.

It could be that you give somebody who’s got a lot of customer contact a pot of budget to be able to spend to send gifts or thank yous or cards or whatever it might be. So you’re actually giving people some responsibility within the business; it’s not all just resting with you.

And finally, having a clear budget, if you put that into Xero or into QuickBooks, it means that your management information and your management reports suddenly become hugely more relevant.

You can see exactly what those figures mean each month against the budget where you are year to date. You can compare where you are this year to last year in terms of the budgets, etc.

Having a budget is so helpful in so many different ways!

So where do you start?

Well, as we mentioned before, with a detailed planning session. You need to look at what your activity needs to be, and then you need to look at each line within your accounts to say, right, what do we need to get to that point? How do we chunk that down and break that down?

As ever, if you need any help with working out a budget, please do get in touch. It’s what we’re here to do. It’s what we do. And we can help you actually understand that process and get the most from it.

We’ve got a few weeks left now of 2018. It would be great to have a budget for either 2019 and what your plans are for that year or for your next financial year.

If your financial year end isn’t until the end of March, don’t leave it until then! Start to think about it, start to work on it.

We can help you do that and go through that process. I’ll leave you with that thought, and I’ll see you all very soon.