Tips to help you budget for new financial year

One of the most important parts of planning for the new financial year is planning where you want your business to go in the year ahead.  This means strategically and operationally as well as financially. For small businesses, often one of the biggest challenges that is faced is cashflow.  Knowing what your forecasted cashflow is gives you the opportunity to plan ahead and avoid disaster.  This may mean ramping things up to increase turnover at the same time as understanding how this will affect debtors, creditors and cash collection. It may mean being more vigilant with your debtors collection or applying for an overdraft extension well in advance of when you need the funds. Knowledge is power.

Here’s a few tips to help set your budgets for the coming year:

• Plan in the timeframe that suits your business, this may be fortnightly or monthly. You may set an annual budget by month and then weekly projections as you go through the year;
• Overestimate expenses. Make sure you have a buffer for those unplanned expenses that crop up;
• Create realistic cashflow projections! Overestimating your cashflow projections won’t help you in the long run if they are unrealistic;
• Update your budget every month. You put all the time into planning so it is important to make sure you are tracking how you are going. If sales are down against budget, this will have a flow on effect;
• Don’t forget to plan for capital expenditure and plan accordingly;
• Identify non-essential expenses that can be cut if things get tight;
• Review your service providers and make sure you are getting the best deal from your suppliers. It’s worth revisiting this at least annually;
• Review your debt and interest rates. Consider if you should be refinancing to reduce repayments and interest charges;
• Keep some money aside for unexpected contingencies or losses; and
• Make sure you understand when your taxes and employee obligations are due and plan for these. Remember the GST you collect from your customers belongs to the ATO, not you! Make sure you keep this aside. This goes for PAYGW and employee superannuation payments as well. Pay these monthly if it helps you keep on top of them.

Let Us Help

The best thing you can do with your budgeting is to make sure you have one. Last years figures may be a good indicator but take the time to consider what will be different in the year ahead and where you can improve.  If you need any assistance with getting started, please contact us.