"Add Budgeting to your End of Financial Year 'To Do' List" Article by Tina Zawila

The new financial year is almost upon us!  By now, you should have done” all you can do” to make 2013 a success and implemented your tax minimisation strategies.

Now, it’s time to look forward to the new financial year and set our goals and targets that we want to achieve over the next 12 months. 

A budget is the only instrument that can give financial reality to your goals, objectives, strategies, priorities and plans.  A budget is the numerical expression of your plans for the next and future years.

Your budget process should consist of at least three main parts:

 1. Forecasting revenue (sales) and expenditure (expenses),

 2. Recording actual revenue and expenditure and,

 3. Reporting and acting on any variances (differences) between the two. 

At this time of the year, we generally focus on Step 1, and we encourage you to attend to this step as soon as possible, so that you can move onto steps 2 and 3 as soon as the new financial year ticks over.

A budget which incorporates working capital requirements provides an even more useful management tool.  It provides a clear indication of your working capital requirements, your desired stock levels and expected debtor and creditor balances based on desired credit terms.  Generally speaking, businesses struggle with cashflow more than they struggle with profitability.  Therefore, a budget which considers your cash position helps you prepare for those “ups and downs” that are common within many businesses.

The ultimate benefit is achieved from your budget if you use it proactively – that means that you consider your budget prior to actual revenue being earned or expenditure being incurred.  It shouldn’t be a “set and forget” document, but one that you refer to on a regular basis to monitor your progress towards achieving your goals and targets.

Have you set goals and targets to achieve over the next 12 months?

Did you consider your cash position for those “ups and downs” throughout the year?

Do you have a procedure in place to monitor your budget on a regular basis?

We strongly encourage all business owners to invest the time in creating a budget and then use it proactively.  Contact the team at Sothertons Gladstone on 4972 1300 for professional assistance and advice in creating your 2013/14 financial road map.