Talking Cents

Tips on budgeting and forecasting by small business accountants

Proper budgeting is one of the first steps to effectively managing a small business’ finances. A budget predicts how much money will come and go from your business over a specific period of time and allows businesses to see if they can afford to expand. It allows you to see your business’ breakeven point, whether or not you will need to borrow money, and also helps with your product or service pricing. Here at M.A.S Partners, the leading small business accounting firm in Sydney Zetland, we understand the importance of realistic budgeting, and the steps businesses need to take into getting a budget that works for them. As such, we have provided some tips on creating a budget.

Record your current inflow and expenses
To know how much you need to set for your budget, you will need to know exactly how much your business currently earns and spends on a monthly basis. If your business has many different streams of income, it is important to track all of it. This would include money coming from investments, and your revenue from sales. In addition, it is highly pertinent that you track all of your business’ expenses- which includes your production costs, rent, and much more. It is impossible to set a realistic budget without knowing how much you actually earn and spend.

Separate your fixed costs and variable costs
Once you know exactly how much you spend, make sure that you categorise your expenses into fixed and variable costs. Fixed costs would include things such as rent, supplies, debt repayment, payroll, insurances, depreciation assets. Variable expenses may include, your salary, replacement of equipment, office supplies, marketing costs, R&D, and utilities. When you have them separated you are able to see where your business is overspending, and during lean months, you are able to cut down on variable costs.

Have a contingency fund
Contingency funds are a great way to prepare for the unexpected. Often these large financial changes can come at the worst times. By having a generous contingency fund, you are able to remain calm even during tight budget times. Although it may be tempting to reinvest any surplus of income, a contingency fund will go a long way for your business. The last thing you want is to invest in a large building, only to not being able to afford it shortly after.

Hire a small business accountant
Small business accountants provide expertise that will help any business grow. Especially when starting off, your business may struggle with pricing and budgeting. An accountant will use in-depth accounting reports to help you have a realistic budget, preparing you for the future. Our small business accountants at M.A.S Partners, have worked with hundreds of different businesses, handling their bookkeeping tasks, whilst also provide expert advice. For more information on our small business accounting services, click here.