As we enter 2022, planning for the year ahead is underway. We’re setting our new goals for the year and putting measures to help achieve those goals. Annual business budget planning is an essential task that SMMEs often overlook. However, it is crucial to setting your company up for success. Why? It provides your business with the ability to answer those all-important questions about what the next 12 months will look like for your business. Here are some things to include in your annual business budget.
You created your business to offer a product or service that satisfies a want or need, so sales play a vital role in your company’s success. They directly influence costs, but it can be tricky to make projections accurately. Start by looking at the past months, and determine the amount coming into your business each month. This is the money that comes in before any expenses are deducted. Once you have identified this, you can decide if you plan to grow this monthly income or if it won’t be sustainable. Some months are better than others, so you will need to account for this too.
Once you have calculated your estimated revenue, it’s time to focus on your expenses. Your fixed expenses, such as rent, leases, insurance, salaries, and certain other services purchased, are generally easier to predict. You will also need to take a close look at variable expenses. The start of a new year is always a good time to look for ways to save money as a business. Many employees will also be looking at a raise, so this will need to be accounted for. You will also need to look at potentially hiring new employees if your business plans to grow. It’s also a good idea to set aside a contingency fund for any unexpected costs.
Create a Profit & Loss Statement
This might sound like a lot of work, but you’ve already done most of it! Add up your projected income for each month, and subtract your predicted expenses. As long as you get a positive number at the end of each month, you are making a profit (no matter how small it might be). Small businesses aren’t profitable every month, but some months are better than others so that you can balance this out annually.
Making your Annual Budget more Efficient
Investing in accounting software makes it easier to track your income and expenses and automatically create profit and loss statements. Not only does this make annual planning simple, but it helps keep a close eye on how your finances are looking each month. This way, you can make any changes you need to ensure the success of your business.
Need some help managing your cash flow?
Our team of finance experts can help with planning your annual budgets, as well as monthly services to keep your finances in check. We’re ready to help you make 2022 your best year yet! See more here: https://financestudio.co.za