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Now that the financial year 2021–22 is almost over, we recall the previous year for many reasons, things we’d like to change, decisions we’d like to reverse, and lessons we have learned from facing all those challenges. You can use this learning from your previous budget to develop better plans, support the current budget model, and design process flows based on the allocations. If you still haven’t gotten it right?
Here is what you should do:
In this blog, we have pointed out the 8 most important steps in financial planning. You can consider this when managing the “common money management problems” in business to get better and different outcomes in your next budget.
Let’s find out how:
- Previous budget reviews
- Review of Goals and Results
- Collaboration among the leaders
- Set out the fixed and variable cost
- Forecast additional spending
- Measuring Cash Flows
- Funding decisions
- Clear communication with peers
1. Previous Budget Review
In the first step of preparing an efficient financial plan, it would be better to review the entire fiscal year and take references from the previous budget allocations. You can start with a detailed goal analysis of earlier outcomes, analyse their inputs, test assumptions, assess investment decisions, and identify shortfalls in the previous budget. The following assessment will help you determine the day-to-day operational needs and will also help you manage capital for future spending and investments efficiently.
2. Review of Achieved Results
Short term and long-term goals are crucial for long-term business success planning since only they can tell the real-time impact of investing money and efforts in various processes. In this step, you will assess how the assumptions performed in the previous budget and set your investment goals.
3. Collaboration among the Leaders
The need to have finances in better shape is a continuous cycle of planning, monitoring, and review. A cooperative assessment approach can enhance your efforts and improve budget efficiency.
Effective collaboration can clear most of the doubts only in the initial stages. In a myriad of ways, it lets finance planners, Chartered Accountants, and accounting partners learn about other teams’ priorities, needs, and suggestions.
Based on a business’s Accounting Services Need and Financial Statements Audit requirements, they can offer a precise spending plan for the year that is efficient and accurate in all terms. In this step, listen to your teams first, and consider their ideas and feedback into account. It will surely help you avoid difficult conversations in the end.
4. Set out the Fixed and Variable Costs
Fixed costs, referred to as overhead costs, do not affect your sales or production volume in a yearly budget. They do not change per month and are easy to budget. In any initial budget, it may include rent payments, insurance premiums, real estate taxes, loan payments, and others.
In most cases, variable expenses are optional daily expenses that may change on a month-to-month basis. You will get bills each month, and you will still be able to lower them with lower-priced plans.
Examples of variable costs are marketing and advertising, payment of software subscriptions, travel expenses, investments and donations, production supplies, commissions, delivery costs, packaging supplies, credit card fees, etc.
5. Additional Spending Forecast
An industry can be booming one month and slowing down the next. In such scenarios, the best way to proceed is to have a slack budget to cover unexpected costs when the going gets tough.
After all, a rigid approach may not work here. Instead, you can add rolling forecasts to review the budget every quarter of the year. You can add additional spending estimates to your current budget only. This way, you can get accurate forecasts of additional spending along with other fixed expenditures.
“As Hal Shelton writes- When you picture a budget, you likely see spreadsheets with many numbers. But more important than the numbers are the assumptions that drive the calculations.
6. Managing Cash Flows
When you start a business, it is vital to have a regular cash flow management system. Good cash flow is an indicator of a healthy business. Poor management of cash flows leads many small businesses to fail to handle necessary expenses. Thus, it enables financial stability in business every time you go through significant financial challenges, such as lacking cash reserves, expensive loans, outstanding receivables, unmanaged processes, etc.
7. Funding Decisions
Determining whether you have enough money to fund operations will only be possible with an accurate forecast of cash flows. The right financial planning with having Best accounting services in Melbourne beside you can help you achieve that by providing the right information at the right time. It will also help you make well-informed funding decisions vital to stable financial health. Enable you to better predict future growth, set revenue goals, manage expenses, and hold up a stable financial state.
8. Clear Communication with Peers
Peer-to-peer communication affects planning the most. In many ways, it shows how your business will grow throughout a financial cycle. While making the budgeting process efficient and smooth, it creates opportunities to incorporate inputs from senior management, the finance department, and budget managers, accounting partners. Just as much as it improves collaboration among teams, it also strengthens relationships with customers, consumers, and major investors.
Why is Budgeting Important?
When you run into problems financially, cutting costs on luxuries might not be enough; you may also need to limit usual and necessary expenses. By tracking expenses and following the right financial plan, you can have a positive cash flow in the organization, which is essential for healthy business growth and secure financial stability.
run out of cash, have a load of unused resources, incorrect investments, etc. Such situations are both common and easy to deal with when you have a budget prepared by accounting experts.
Finding the Right Accounting Firm in Melbourne
Looking for a financial planner to get through the complex budgeting process? At Mizael Partners, we make accounting easy. Our chartered accountants can help individuals, small businesses, enterprises, and not-for-profit organizations with financial issues.
“We follow the best financial planning practices to ensure you get it right.” Contact us today to learn how you can soar in the new year.
Mizael partners can help you prepare your financial budget for 2022–23, with clear cash flow objectives. To speak with one of our accounting experts, you can call +61 (0) 466 228 000 or visit our website today! We help with auditing, bookkeeping, and forensic accounting.