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Budgeting guide from small business accountants

Budgeting is everything when referring to a business’ financial situation. Growth is almost impossible without realistic budgeting, and as such, small businesses should prioritise this in order to achieve or maintain positive growing profits. However, despite the clear benefits of efficient and effective budgeting, it can often be difficult to predict your future expenses. We at M.A.S Partners, small business accountants based in Sydney Zetland, have provided a guide to help you prepare a realistic budget for your business.

Use appropriate accounting software
Budgeting is almost impossible without accurate accounting reports. Reports such as a profit and loss, balance sheet and cash flow statements are absolutely pivotal when creating a realistic budget. By using the appropriate accounting software, you are better organising your reports, and will be able to be analysed for future preparation. Accounting software allow you to automate and streamline your bookkeeping tasks such as data entry, which reduces the risk of human error. The majority of accountants prefer to use XERO due to the accessibility and wide range of features.

Analyse accounting reports
Once you have experience using accounting software, and start producing accurate accounting reports, it is time to analyse them. There are three main reports that you should take into consideration when budgeting, a profit and loss statement, a balance sheet, and a cash flow statement. The profit loss statement describes in specific detail how much money a business makes. In doing so, it includes your income, expected income and expenditures. The balance sheet summarises all your business assets and liabilities, including how much cash you have, and your current resources. Lastly the cash flow statement describes your business’ liquidity. Analysing all three reports, you are able to accurate predict how much you are able to spend or invest, depending on future income and how much cash you have present.

Create hypotheticals on your sales
When creating a budget, it is a good idea to create multiple versions that cover different scenarios. Using past records is not always accurate in predicting future sales. As such, you should create budgets that plan for unpredictable situations such as: sales going up by 10%, sales dropping by 20%, rent is lowered. By creating multiple budgets that plan for these events, you will better prepare your business.

Consider hiring a small business account
Most accountants and bookkeepers help manage your reports and also provide budgeting advice. Although many businesses are reluctant to outsource to small business accountants, it is the most effective and efficient way to handle budgeting and analysing reports. Here at M.A.S Partners, with over 60 years of experience, we work with hundreds of clients to them with objective cash flow analysis, KPI analysis, budgeting and much more. For more information on our services, click here.

 
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