Member Article

Setting An Annual Budget

With Business LinkWhatever the size or stage of your business it is essential to regularly plan and tightly manage financial performance. Creating a budgeting process is the most effective way to keep the business and its finances on track.Nicki Clark from Business Link looks at how budgeting and planning can help to improve business efficiency.As a manager, it is easy to get caught up in the day-to-day demands of running a business and forget the bigger picture. However, by taking a step back from the business and investing time to manage budgets, review business plans and regularly monitor performance, you may find that your business runs more effectively. Structured planning can make all the difference to the growth of a business. It will enable you to concentrate resources on improving profits, reducing costs and increasing returns on investment.Business planningIf you are planning for your business’ future, you will need to fund your plans. Budgeting is the most effective way to control your cashflow, allowing you to invest in new opportunities at the appropriate time. A budget is a plan to control your finances, enabling you to make confident financial decisions, meet your objectives and ensure you have enough money for your future projects. If your business is growing, you may have to split your budget up between different areas such as sales, production and marketing etc. It may be that money starts to move in many different directions through your organisation, therefore budgets are a vital tool in ensuring that you stay in control of expenditure.The benefits of budgeting There are a number of benefits of drawing up a business budget, including being able to manage your money effectively, allocate appropriate resources to projects, monitor performance, meet your objectives, identify problems before they occur and plan for the future. Creating a budgetCreating, monitoring and managing a budget enables you to allocate resources where they are needed, so that your business remains profitable and successful. Work out what you are likely to earn and spend in the budget period. Begin by asking yourself what are the projected sales for the budget period? Be realistic - if you overestimate, it will cause you problems in the future. What are the direct costs of sales – i.e. costs of materials, components or subcontractors to make the product or supply the service? What are the fixed costs or overheads? Once you’ve got figures for income and expenditure, you can work out how much money you’re making. You can look at costs and work out ways to reduce them. You can see if you are likely to have cashflow problems, giving yourself time to do something about them. When you’ve made a budget, you should stick to it as far as possible, but review and revise it as needed.For Business Link services in your local area, please call: 0845 600 9 006. For further information from Business Link, visit: www.businesslink.gov.ukBusiness Link services in the North East are supported by the European Regional Development Fund, through the Government Office for the North East, and One NorthEast.

This was posted in Bdaily's Members' News section by Ruth Mitchell .